Corn, Soybeans, and China

Corn, Soybeans, and China

Corn, Soybeans, and China

January Soybean contracts (ZSF11) closed this week at 1238^4 just 38^4 cents above the 50 day moving average. Since July Soybeans have exploded and traded above the 50 day moving average; testing it a few times up until now. December Corn (ZCZ10) currently trading at 538^2 just 8^2 cents above the 50 day moving average and also has traded above the 50 day like beans.

Beans have an upward potential to move closer to 1300^0. The RSI indicator is below 50 moving into oversold territory. Corn has an upward potential to reach 600^0 now that it has covered its gap. Any disruption of supply could help support this movement.

This coming week also could be the testing point for both corn and beans and the support of the 50 day moving average on the daily charts. The Euro debt crisis is gaining strength and with war conflicts in North and South Korea could help push both ZCZ10 and ZSF11 contracts below their 50 day moving averages. Corn has covered its gap that it created in October after the USDA crop report and usually turns to gain after the forming a gap. If the 50 day is broken we could see corn test the 500^0 support to 460^0 if enough selling persist. Soybeans are looking at a support level around 1200^0 to 1150^0 (October Gap).

The grain market looked to continue its surge a few weeks ago but China quickly put the breaks on by raising interest rates to cool it economy. I find it ironic because China is suffering from grain supply shortages due to drought conditions and need to purchase US grain to rebuild stocks. As we know China likes to have a control over price and earlier in the year of 2009 we saw China sell it's inventories into it's provenances' to lower U.S. prices to by our grain at a cheaper price. The same is happening now as China is raising rates to lower speculative holding positions and increasing margins to pull liquidity out of the market and push prices lower. It's a bully move to get exactly what they want and manipulate supply and demand fundamentals.

With the global grain markets becoming tighter and South America looking to plant a record crop in spite of weather conditions it is inevitable that 2011 could be a record price year for both corn and beans and even other commodities.

The Euro debt crisis is our biggest focus because Ireland is pushing to get a significant bail out package to pull itself out of this slump and save the EU. This is only the beginning because once Ireland is saved there is still Portugal and Spain to contend with. The EU dilemma is becoming systemic and could put the breaks on the global recovery sending markets crashing once again. This could help push grain prices lower; beans back to 1000^0 and corn back to 400^0.

Support and consolidation could be the trade for the grain markets for the rest of this year because with a grain shortage and increase demand for US grain could help stabilize the market in spite of the EU debt crisis. The one thing that is for sure is "Inflation"! 2011 could be the year of commodities especially grains! Global governments, including the US is calling for balanced budgets in the middle of a recession recovery. It's impossible to balance a budget when unemployment is at a record high. In order to keep the economy growing global governments will have to print more money creating inflation and driving the commodity markets to record highs.

All in all look for this coming week to be a week where corn and beans come off their highs due to the rising dollar and EU troubles. China demand could help keep the grain market above the 50 day moving average and restore fresh buying from speculators, funds, and hedgers. Check your grain elevators for basis prices to determine if now is a good time to sell.

GRAIN ELEVATORS

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