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Grains Market Review for The Week of August 1, 2011

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Grains Market Review for The Week of August 1, 2011

Postby pitgurufk » Tue Aug 02, 2011 6:15 am

The Grains Review
For the week of August 1, 2011

By Matthew Pierce

On Friday traders saw a good beating of agricultural markets as month end, debt issues and poor technicals caused weak length to jump ship and short term technical traders to get short corn. This was an idea that any CTA would ignore but black box traders have to follow the program so they got caught short as seen overnight. The biggest concept on the day was paper buying large delta put spreads in Dec using a short call to finance. This is a risky and so far poor choice but once again black box concepts are total packages.

The weekend brought all kinds of fun information out of DC with a deal finally getting done in only semi dramatic fashion with the Senate leading the charge. It seems Reid and McConnell have a brain cell between them. The problem is this is not a solution, just a band aid. The US needs to look at itself in the mirror and make major changes or this will only get worse. Looking at weather, it was wet in MN, WI and into MI over the weekend with central MO receiving the first real rains in weeks. Both are slightly bearish factors as both corn and beans look to stabilize into the first half of August with temps moderating with only the SW with KC and TX affected holding a hot and dry pattern. Concerning deliveries I saw no beans which was expected offering a bit of momentum to the overnight rally.

The overnight session was higher in response to the expected positive vote for the debt deal with the USD falling quicker than corn did in March. Asian markets rallied in response helping commodities everywhere. There was nothing on the demand side to help matters and technicals remain negative so this may be only a head fake with crop progress expected to show only a 1% decline in beans with corn called either side of unchanged. This is not in and of itself bullish or bearish, simply moderating. Couple this with weather and a lack of international demand and traders have nothing to get overly excited about. The rally overnight in beans oil is in response to palm oil, crude oil and weak oilshare levels. In wheat traders saw a solid rally with bullish sentiment in both KC and Minny. The KC harvest is rolling forward basically at will with weather cooperating. Yields are increasing dramatically as they move further north with yields falling below 13%. Test weights are falling slightly but overall it is going better than expected.

Heading into the day session and the first trading day of August things are still macro driven with fundamentals offering little if any immediate incentive to the upside. Indicators in corn, beans and wheat are firmly negative with room to continue to the downside. Weather is moderating with only the SE looking grim. The USD is bullish for commodities but I do not feel that is enough to carry markets all this week. Bulls need to watch for any further change in weather patterns with world weather currently too calm to get fired up. Bears need to do the rain dance with any break up of expected storms in central and southern IL and IN making you very nervous. Technical traders need to look at the 100-day in beans first with indicators in corn the second obvious impact this week. No major USDA reports so look at crop progress today and export sales on Thursday for momentum with macros sure to lead any charge this week.

Disclaimer: Past performance is not indicative of future results. Trading futures and options involves substantial risk of loss and is not suitable for all investors. Fundamental factors, seasonal and weather trends, daily news, and other current events may have already been factored into the markets. The use of stop loss or contingent orders may not protect profits and may not limit losses to the amount intended. Certain market conditions make it difficult or impossible to execute such orders.
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Grains Market Review for The Week of August 1, 2011


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