Weekly Pit Review

January 23, 2012

The Grains Pit Review
By Pit Guru 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 Ive 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 its 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.

The Metals Review
By Daniel Cronin


The Softs Review
By Jurgens H. Bauer


The Financials Review
By Frank LaMantia


Disclaimer: Past performance is not necessarily indicative of future results. The risk of loss exists in futures and options trading.

Copyright 2007 FuturesBuzz.com. All rights reserved.