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PitGuru.com's Grains Analysis: Jan 23, 2012
Sunday, January 22, 2012
by PitGuru.com Authors of PitGuru.com
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The Grains Review
For the week of January 23, 2012
By Matthew Pierce
Friday saw a very sluggish session once again but instead of all markets rallying like Thursday, corn led the charge. This was helped by a strong domestic and gulf basis bid and spreading between corn and wheat and corn and beans. The gulf bid is gaining steam due to rumors, just rumors that China is back in looking for summer corn following continued reports out of Argentina of a high teens corn crop. The latest I’ve heard is 19-21 MMT with a bit more possible if rains expand into early February.
A major spread move was noted; CN-Z widened by another 4-cents adding to the 5-cents seen Thursday night. This is thought to be fresh money coming into the July taking advantage of expected Chinese interest. If it is true that China is coming back in, myself and other spread bears will take some serious heat if not be forced out. The pull in corn spreads was not felt too much in beans but SN-X did trade out past 20-cents. KWH and KWN hammered WH and WH showing the pull to KC is alive and well. MWH-K showed more strength with more expected next week as the screws are turned.
Over the weekend we did indeed see rains in Argentina but they were mildly disappointing depending on whom you talk to. Coverage was about 60% of expected with amounts reaching 3 plus inches in small pockets with the average between .50-1.50”. More is expected today and tomorrow so fundamental traders are waiting to see results before jumping in with both feet. .50-.75” is the expected amounts today and tomorrow. Northern Brazil remains an issue with extensive rains expected in Mato Grosso delaying harvest. There is no talk yet of rust problems but they could be on the horizon if the rains continue. World policy news was quiet with Asian markets closed or on skeleton crews due to the Lunar New Year. Let the year of the Dragon begin. The biggest news came out of the UN which agreed on the Iranian oil embargo effective in 6-months time for existing deals or immediately for new deals. In response this morning Iran threatened to cut off all EU customers immediately. This is a dangerous cat and mouse game which has lit up the natural gas market this morning.
Overnight started firm and held those gains all session. Outside help from the Euro adds to momentum and following the COT on Friday, traders are looking for a reason to buy.
Fundamental news is quiet this morning with many still watching S. American weather. There was information out of Paraguay over the weekend stating their crop is 20% lower this year versus last year. This is only about 1.2 MMT but another hit to the world balance sheet which is still way too high concerning Argentina. Cattle on Feed numbers were as expected showing a 6% drop in December due to drought in western states and high feed costs. This will make beef expensive for the Memorial Day BBQ many have. This will have a short term impact on domestic feed demand which should partially stem the current move in CN-Z.
On the macro side today traders have the Euro back over 1.30 which is a bit confusing because there was nothing good out of Greece this weekend. Many attribute it more to talk of US easing monetary policy rather than anything out of Europe. Iran blustering has crude on the offensive while natural gas caught a bid based on Iran and reports of Chesapeake cutting dry drilling.
Overall it’s a bullish start to the week with the Euro, weather and crude still the major catalysts. Look for bull spreads to win across the board adding pressure to bears in flat price and spreads. Massive shorts in flat price wheat are concerning to fundamental bears there offering a solid reason to look higher there and across the floor for the whole week.
Recent articles from this author
- PitGuru.com's Grains Analysis: May 14, 2012 - Sunday, May 13, 2012
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- PitGuru.com's Grains Analysis: Apr 30, 2012 - Sunday, April 29, 2012
- PitGuru.com's Grains Analysis: Apr 23, 2012 - Sunday, April 22, 2012
- PitGuru.com's Grains Analysis: Apr 16, 2012 - Sunday, April 15, 2012
About the author
Daniel Cronin - PitGuru.com's Energies & Metals Guru Daniel Cronin has spent years on the floor of the Nymex as part of one of the largest energy floor brokerages in the business. His extensive experience stems from not only his Pit background but also through intense studying and implementation of complex technical analysis and market trading techniques via the mentorship of the now retired Ralph Acampora. Mr. Cronin brings subscribers a rare combination of book smarts and real world trading experience in one of the most volatile market sectors in the futures industry. Matthew Pierce - PitGuru.com's Grains Guru Mr. Pierce is a unique acquisition for Futures Press Inc. in that he has an unmatched level of real hands-on experience within the industry in addition to his floor trading expertise and top notch education at the University of Illinois College of Agriculture. Matthew has literally cultivated the perfect professional career as a grain expert by working with the industry's most recognizable companies such as Cargill, LaSalle Group, Conagra, Walsh Trading Inc. and many more. In addition to trading on the floor of the Chicago Board of Trade, Mr. Pierce writes what many in the business believe to be the best kept secret amongst trading reports available in the industry. Jurgens H. Bauer - PitGuru.com's Softs Guru Jurgens owns and operates his own order execution firm on the ICE trading floor. He has been a member since 1987. His firm, Jurgens Bauer and Associates, specializes in executing option orders for a wide array of customers and a variety of industry participants, including individual speculators, funds and members of the trade. While Jurgens has been an active member of the trading community he has also spent time since 2000 working at raising awareness of environmental commodities, educating industry professionals on emissions trading, brokering transactions between private counter parties and developing SO2 and NOx contracts for the NYMEX. Frank LaMantia - PitGuru.com's Financial Guru Soon to be Dr. LaMantia, Frank is not only one of the most educated traders on Wall Street, but also maintains an industry resume of substance and depth. Frank has worked extensively on an Institutional preferred stock syndicate desk, as a government bond specialist, and as a financial advisor all the while achieving multiple licenses in the finance field. With an extensive and impressive client list (including Citibank, Bear Stearns, Lehman Brothers, AG Edwards, Mesirow, UBS, and numerous Hedge Funds), Mr. LaMantia brings his one-of-a-kind background to his current occupation of full time trader.
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