Ottawa Coop Grain Comments

January 31, 2012

Wheat leads on feared European cold snap.

· Corn

March corn closed 7 ¼ cents higher today, but 7 ½ cents lower for the month. Corn has stalled having set back each of the last 4 sessions after testing the low to mid $6.40 range basis the March. Market is torn between western hemisphere production woes on one hand and the likelihood of the highest US planted acreage since WWII. Mexico’s new crop production was downgraded today by their Ag Minister to 21.8 million metric tons from 25.0 mmt. This compares to the last year’s drought-stricken crop of 19.2 mmt (755.9 million bushels).

On the flip side, Kansas and Nebraska producers hopeful for forecasted precipitation in the 5 day forecast:

The extended maps revert back to below normal precipitation. Market is bracing for La Nina drought to creep into the western Corn Belt.

Soybeans

March soybeans closed 13 ¾ cents higher today, but 8 ¾ cents lower for the month. Market added back a fraction of yesterday’s steep losses on only light rain forecasted for the next week in parts of southern Brazil. Argentina has improved to the point of being off the critical list with rains there reportedly received in time to help the soybeans, but not the corn.

Trade is looking for additional contra seasonal Chinese purchases of US soybeans due to concern over South American production losses. Export inspections for last week were well above expectations at 41.5 million bushels versus 18.0 needed weekly to hit the USDA annual estimate. China took 26.75 million despite being on holiday last week.

What is the price level that properly discounts improving Argentine weather and deterioration in southern Brazil? A weather market keeps the trade guessing and probably range bound between $11.75 and $12.25 basis March futures.

Updated supplemental CFTC reporting shows index (inflation hedge-inspired) fund longs at 348,053 corn contracts (up 4,255 contracts on the week) and 167,212 soybean contracts (2,053 caks more than the previous week) net of futures and options as of 1/24/2012. The outside markets were mixed; crude continues to find resistance at $100 / barrel spot futures.

	Last	Change
March crude oil	98.48	-0.30
March heating oil	3.0509	0.0131
March $ index	79.435	0.133
Dow Jones Industrial Average	12632.91	-20.81

· Wheat

March futures closed 18 cents higher today, but 1 ½ cents lower for the month. Chicago fund shorts finding themselves east of the rock and west of the hard place with winterkill threat stretching from France to the Black Sea with single digits and colder possible over multiple days with limited snow cover. Chatter persists about an eventual export duty on Russian wheat. It does look like a recipe for a short squeeze.

Texas with its crop rated at 38% poor to very poor looks to be short-changed by the end of the week precip event, while KS receives welcome rains before turning dry again:

http://www.cpc.ncep.noaa.gov/products/predictions/610day/index.php

http://www.cpc.ncep.noaa.gov/products/predictions/814day/index.php

Non-Commercial Funds Estimated Position (futures position only, in contracts)

Commodity	CFTC 1/24/2012	Current Estimated Position	Today’s Estimated Activity
Corn	+179,454	+190,454	+7,000
Soybeans	+52,242	+45,242	+5,000
KC Wheat	+12,975	+12,975	+500

This data and these comments are provided for information purposes only and are not intended to be used for specific trading strategies.  Although all information is believed to be reliable, we cannot guarantee its accuracy or completeness.  Commodity trading involves risks, and you should fully understand those risks before trading.