Corn Market:

Old crop: Broad based commodity fund liquidation rules on Wednesday. Collapsing precious metals, energies and a surging US dollar all led to the sell off. Due to the trading limit restrictions the 50 day MA is still holding. If we didn’t have the limit restriction this MA would have fallen by the wayside. April options expire on Thursday. The declining flat price makes the owners of short options even longer. I believe this has added to the break. Thursday may give us one more day down on this break but I anticipate short term lows will be established over the next two sessions. On the 31st the USDA will update Quarterly Stocks. This will give us an idea of what we will have to work with for the balance of the 2007-08 marketing year. Personally I do not see this report as giving us any more fuel for higher prices. It is my belief that we will have more than enough corn to handle any demand for the balance of the marketing year. During the break we have seen little change in the interior corn basis. The Gulf market, however, has firmed. I think most the firming action at the Gulf is due to logistical problems with shipping due to high water levels coming out of the mid-Midwest. My longer term bias remains for old crop to lose to new crop.         
 
New crop: New crop took its lumps along with the old crop on Wednesday. I don’t think the break has anything in it directly related to new crop corn. The market just got over inundated with spec longs.  I do feel short term lows will be established over the next two trading sessions. On the 31st the USDA will release its first ideas of planted acreage for the coming season. Even though we can see demand trimmed back in the new marketing year it is my belief we will lose too many acres to soybeans and spring wheat. Corn next year could easily be the new “wild and crazy” market if we have any kind of weather scares during the growing season. As of this writing there are some minor concerns developing over the possibility of delayed planting. Areas of the Midwest and Delta have received copious amounts of rain over the last few days and there could be more over the next few days. Right now I would be shocked if December corn went through the $5.25 - $5.20 level for any sustained length of time.

Wheat Market

Old crop: Not to be left out the flat price of wheat cratered on Wednesday. I believe daily trading limits will expand to $1.35 because of Wednesday’s limit move. I’m not sure the 90 cent break was fully merited, but similar to the other day when both corn and soy were limit down traders went looking for something else to sell.  $10.50 should initially hold this break if there is any further selling on Thursday. On the 31st the USDA will update the Quarterly Stocks. This will act as a reminder of just how tight old crop US stocks became this past year. It will also act as a reminder of how important the success of the new crop is.                                    
 
New crop: Chgo new crop finishes limit down, KC and Mpls do not. I think this is a result of the bigger spec trade in Chgo and also realignment of the spreads between the different varieties. It is my personal opinion that new crop Chgo is too high priced vs. KC. As much as I would like to think that new crop Chgo has additional downside due to its acreage increase a short term low will be made over the next two sessions. The $10.25-$10.10 level should provide some support to this break. On the 31st the USDA will update the winter wheat seedings and will give us a look at their ideas on spring wheat plantings. This will be the first look at their idea of spring wheat planting. We already know that SRW plantings are big and HRW are not as big as originally thought. Some are thinking the HRW number may be revised up by 400K to 500K acres. Dryness is a concern in the western, southwestern reaches of the HRW areas. Flooding has become a concern for some of the SRW areas, especially if the rains in the central southern areas of the Midwest.

Soy Complex

Old crop: Broad based commodity fund liquidation rules the roost. Please remember on the way up funds were almost reckless in their buying. Their liquidation has the same MO; unfortunately for them the market just got way out of balance on the way up and now it is happening on the way down. April options expire tomorrow, Thursday. With the collapse the short puts they established on the way up has just made them longer. I don’t think anyone wants to get longer over the three day Easter weekend amid the current price collapse. Cash markets for export are expected to firm as Brazilian premiums are sharply higher. Many had thought the larger than expected Brazilian crop would move business down to them.  With their premiums moving higher it could easily push business back to the States. I expect to see the Supply-Demand data in the US to get even tighter in the months ahead. On the 31st the USDA will report on the Quarterly Stocks. This will shed more light on just how tight we can get. I think interim lows will be made over the next two trading sessions. Watch the Jan 23rd lows for support.       
 
New crop: Not to be left out new crop soybeans collapsed on Wednesday. I think this was all part of the general commodity sell-off.  My belief is that the US producer will find the needed acres for the coming season that will give us a crop size large to give us a more comfortable carryout for the new marketing year. Like the rest of the Ag commodities I believe a short term low will be made over the next two trading sessions. On Monday the 31st the USDA will give us their first “official” idea on new crop soybean acreage. “Smart guys” think we need a 9.0 – 10.0 million acre increase form last year. Personally I think the USDA will not give us a number that big on this report. My idea is that they’ll give us something in the 7.0-8.0 million acre increase area.  It will be subsequent updates that give us the final acreage closer to a 10.0 million increase. This is similar to how the USDA finally acknowledged the corn acreage from last year; they couldn’t get there right away, it took subsequent reports to get to the final acreage figure. Market action will tell us if they got the acres or not.


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