Free Commentary

By: Dan Hueber –

Grain and soy markets are struggling this morning, making yesterday’s rebound appear to be little more than a one hit wonder.  Improving weather conditions in South America appear to be responsible for at least a portion of the lack of buying interest as would a rebound in the U.S. Dollar.  I essence, there is not a lot of news around but that which is there does not happen to be terribly supportive.

While we have barely moved beyond talking about La Nina, we now find predictions of a possible El Nino returning.  While hardly a foregone conclusion evidently some models are suggesting that by spring/summer of this year we could swing back to that phenomena but recognize, even if that were the case any impact on the 2017 North American crops would be negligible.  That said, the same may not be the case for the Southern Hemisphere and particularly Australia were this to truly develop.  Just one of those tidbits we need to keep in the back of our minds and at this early date, way to the back.

With all the Washington attention and controversy being directed towards the new presidency, we may have overlooked that the Federal reserve is holding the first meeting of this New Year right now and should publish a policy statement this afternoon.  While no one is excepting dramatic changes within the statement but you can be assured that fed-watchers and particularly those well versed in the art of interpreting fed-speak will be scouring each and every word for a hint as to if they may boost rates again in March.  Maybe that would be phrased better by saying to see if they hint that rates will NOT be raised.  Remember that back in December when they did boost the fed funds rate but 25 basis points the forward guidance suggested we should see three more 25 basis point increases in 2017 and to potentially expect similar moves each year through 2019.  If the message would happen to allude to the possibility they are having reservations about further increases, it not only could suggest that we have already pushed the financial instruments too far and the dollar too high but also that equities have rallied beyond reasonable expectations.

By no means are the grain and soy markets doing anything drastic to the downside this morning but for now it would appear that we have returned to a downward corrective mode.  March corn futures thus far are holding above key moving average support at the 3.55 level but with daily indicator pointed lower I would not be at all surprised to see that mark violated which would then open the door to a slide back down to the base of support around 3.45.  While that may not be welcome news to those in the farm community, particularly during the month when prices are being set for revenue insurance, but overall this would appear to be little more than a continuation of a larger sideways base building pattern for this market setting the stage for better prices into the growing season.