(Inside Futures) – How would you like the power to say something and make currencies around the world change? On July 11, 2013 Federal Reserve Chairman Bernake who has that clout said, “Highly accommodative monetary policy for the foreseeable future is what’s needed in the US economy.” Worldwide currencies quickly reversed. The US Dollar for two days fell 1.8 percent. The Japanese Yen, the Brazilian Real and Australian Dollar all affecting US agriculture moved higher.
US DOLLAR INDEX When Bernake spoke, the US Dollar fell for two days. But how much was due to Bernake’s statement or due to a market that was slightly over bought and needing a correction. The dollar moved higher from mid June without looking back and after making new highs trqaded sideways for three days. When it fell, the drop stopped after a 50 percent retracement. The gap, two parralel light blue lines, will be the next indicator. A close above will likely signal a new high. Filling the gap and closing below could signal a top was made and a reversal could happen. The Fed Chairman speaks this week. I am sure he will be watching his wording.
US Dollar Index
November 2013 Globex Soybeans First level support around $12.37, the yellow line. Major support appears to be around (red line) $11.98 to $12.01 depending how fast market may fall. Last week’s USDA WASDE Report came up with more planted soybeans. I also believe even more soybeans will be planted as wheat producers double crop wheat acres with soybeans. A small yield of 20 bushels is cost effective. If corn is intended to be planted in 2014 on the wheat/soybean acres, planting beans now would even be beneficial combined with earlier planted wheat.
I find it fascinating how little talk there is about the gigantic soybean crop in Brazil. US reports seem to be pushing it aside and trying to make the US soybean market the price leader. With the cheap Brazilian Real to the US Dollar why would an exporter buy US soybeans from old crop to new crop? South American grains are MAJOR competitors to US grains. For the next two months South American grains are also readily available. The August/January spread is showing August is not being squeezed as were the March, May and July beans. Look for cancellations over the next two to three months. Buyers around the world know US farmers will move soybeans before storing. With the big US corn crop farmers will be storing corn over soybeans.
November 2013 Globex Soybeans
The USDA shaved a few planted acres off the previous report. It wasn’t a surprise. A lot of farmers feel it should have been more, but most of those farmers are talking about acres not on their farms but several states away. Wisconsin is one of the states where producers feel less corn was planted. No doubt few acres were planted but not as many as believed. The “Dairy State” needs silage and corn was planted as late as the first week of June. Also, reports from where corn was planted as late as the last week of May show crops because of warm moist conditions doing very well. Fighting the size of the planted acres of US corn will be counterproductive. The price targets below are levels that are very possible. The lowest $4.37 is a target if prices fall through the end of the month. New crop basis is extremely wide. However, I did find areas across the country where basis narrowed last week. Without farmer contracting, buyers need to insure they have supplies to fill orders from processors. Once orders are filled, basis will widen. As I pointed out in a previous report, the carrying charge is extended. An extended carrying charge is bearish!
December 2013 Globex Corn
The USDA Report was the friendliest to wheat. US feedlots are using more and more of it. However, even cutting world supplies, there will be more than enough wheat especially when feedlots will be moving new calf crops over to corn. China has been a large buyer of late. How much is going into reserves and how much is being fed remains to be seen. Analysts believe feed usage for the hog herds is the main reason China has been a large buyer. However, it must be remembered China’s corn crop a year ago was large and they have trade agreements with Argentina to purchase corn. For close to two years China has concentrated on building reserves with exports of corn and soybeans. Point being, China put the equivalent of $3 Billion US Dollars into the Ukraine agricultural system to increase coarse grain movement. It must also be remembered Russia will do almost anything to keep market share. With the strong US Dollar, I don’t look for long term buying of wheat from China. With the cheap Real, and Argentine Peso, I look for exporters to shop in South America. I wouldn’t be surprised to see Russia buy wheat from SA to meet demand.
September 2013 Globex Chicago Wheat
Charts as of 5:45 AM Central Time 7/15/2013 from eSignal
There are terrific opportunities to trade bear markets. Producers MUST be using current prices to lock in prices. US farmers need to look in their own backyards and quit trying to find problems in neighboring states. There are areas that had problems. Rarely is there a year when there aren’t problems. US CORN AND SOYBEANS COULD EASILY BREAK ALL TIME YIELD RECORDS!
