Grain Market Summary and Thoughts on Jan 7, 2009

March corn fell 11 cents to $4.16-1/2. After hitting two month highs some profit taking today plus falling crude helped fuel the sell off. The forecast has changed for the better in South America with rain predicted in some of the hot, drier regions. The recent bout of hot dry weather has reduced soil moisture in Brazil which has been adding to the stress of crops. The third largest importer of U.S. Corn, South Korea, reports that their largest feed maker might cut imports up to twenty percent.

January Soybeans fell 24-1/4 cents to $9.90 with March falling 26 cents to $9.90. Profit taking pressured the market after hitting the ten dollar level but the large Chinese demand and the recent bout of hot , dry weather in South America may have slowed the break a bit. The possibility of rain in Argentina and Brazil could help fuel the sell off.

March Wheat fell 30-1/4 cents to $6.13 per bushel. Profit taking today after the recent fund buying and the rally in corn and beans helped push wheat to a three month high.

Trends and trading ideas:

Gravity has it way some days in this business and today was one of them. I woke up early to read my daily 4 or 5 page review of all of the markets to find there was another book cooker in India that had the equity markets on edge. The foreign exchange market is and has been looneytown as the USD and the EURO are trading in a ridiculously wide range. And to top it off, today was inventory day for the energy markets. Just like in physics, all it took was a little nudge and gravity did the rest. The equity markets fell victim to profit taking, the crude inventories were larger than expected which sent crude and the products off the cliff, gold was weak and the grains did not have a chance.

Every couple of days I find another blurb that is negative to corn. It is ofcourse already in the market, but with fertilizer prices weakening and corn values strong enough for farmers to lock in some profitability, I am negative corn but it may take time to get there and I recognize that we may trade in a 3.85-4.85 range for awhile, but my long term bias is negative based on the fundamentals and the structural problems in the energy market.

The energy analysts tell me that 35-40 crude should hold this break to the down side. Grain farmers beware of the energy market that wants to roll over below the 32 ish lows from the end of 2008. This would be very negative corn. The bio/ renewable fuels industry already has the O2 mask on, 4.00 corn and 1.35/ g gas for any length of time would force even the most efficient operators onto life support.

We seem to have decoupled from the daily moves in the dollar but I wonder if this will continue throughtout the year. As I stated in an eariler post, the dollar is key to the pricing of our markets in the long run. Stronger dollar in the short run does not always equal lower grain prices, but in the long haul if the low in the dollar coincided with the high in crude oil, we have to consider the fact that a strengthening dollar in 2009 may put significant pressure on the crude market which is the driver for the grains save for production problems.

The short term trend is still higher for c/b/w. Monday is a crop report possibly full of surprises. With weakening fertilizer prices and better grain values there is light at the end of the tunnel in 09 for the grain producers if they are willing to act.

Good luck

Jon Hart