Morning Grain Market Research
Dan Hueber of The Hueber Report - - Mon Feb 12, 10:15AM CST
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Last Friday the grain and soy markets were all acting just a bit top heavy and although we finished the week higher than the previous, they wrapped up the day on a sour note. Do note that the ag markets were not the only commodities to look as if bulls were growing weary, as the CRB Index posted the first serious down week for this New Year, and this after once again failing from the same resistance levels that have stopped this index now for the past three years. Was the commodity bounce over so soon? Why, we barely knew ya! One cannot help but think that the general uneasiness that originated with the volatile equity markets had bled over into commodities as well and considering that record amounts of money exited the global equity scene, one would have to suspect that became universal. Obviously, the weekend has done much to settle nerves as we are witnessing a general rebound just about everywhere this morning. Not only have grains and soy rallied quite well, energies, metals, soft commodities and even equity markets have posted solid gains this morning. It is almost as if everyone has breathed a collective sigh of relief that this did not, or at least did not yet, turn into a full-on panic flush.


It is worth pointing out though that there are two markets that have decided to not attend the rally breakfast this morning; financials and the US Dollar. There is a certain amount of irony here in that higher interest rates theoretically should be dollar supportive and as of late, the dollar has posted a minor recovery, but obviously that is not exclusive. Do note that much of the negatively in equities last week seemed to stem from the belief that the Fed could be boosting interest rates more aggressively in the months ahead, which in turn could choke out the economic recovery, and in turn cause investment capital to search out greener pastures on other shores. Granted, next week markets could be operating a completely different set of assumptions but for this morning at least, some of the fears seem to have been set aside and the mantra of a weak dollar equals higher commodities appears to be prevailing.


While I am uncertain how long that may prevail, I suspect that in the ag sector at least, we will need to back up the optimism with supportive news fairly quickly and I am not sure where that may come from for now. Weather in South America appears to have improved some and while that may not translate into better production at this late date, it should at least stop the deterioration. Domestically, I do not see much on the horizon outside the annual USDA Outlook Forum slated for the 22nd/23rdof this month. All this said, if the corn and soy markets can extend upward from here beyond today, I would suggest that is something more than what meets the eye that is beginning to drive our prices.

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