Free Commentary

By: Dan Hueber –

The grain markets and particularly corn seemed to have a little new life breathed into its near lifeless corpse yesterday and we posted the largest single-day advance in well over a month.  I had pointed out in the technical comments yesterday that March futures had not closed outside of a 2-cent range since the 8th of January, nor had we finished above the 3.50 mark since then but seemingly out of the blue, we were able to break that pattern.  I do not see any specific piece of news that prompted the enthusiasm nor have we seen any real follow-through yet this morning but as I have pointed out a number of times, with what should be the majority of the supply news now well into the mix of the batter, the bears would seem to have little incentive to remain in the kitchen.  It would appear that once again the old adage to never short a quiet market may be proven correct.  Do note on the chart that we are pressing right against the 55-day moving average in March corn, which has stopped any rally since October and we have not actually closed above that line since July.  A closing violation of this may not lead to a significant advance right now but I believe would be a solid signal that the tide has turned.

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I read an interesting story in Reuters this morning concerning the recent discussion in the EU to stop using palm oil as a biofuel.  Lawmakers there have drafted an energy proposal that would eliminate the use of palm in bio-fuel by 2021 as a response to concerns about deforestation and other environmental issues in producing nations such as Malaysia and Indonesia who account for 90% of the global output.  While theoretically, this could be a boost for other oilseeds crops, the interesting part of the topic was not about the possible shift in demand but rather concerning the reaction from the producing nations.  While you would suspect that they would try and defend their products and farming practices but in addition to that, they have elected to label this “crop apartheid.”

I do want to bring you up to date on a market that I wrote about last week, and that is interest rates.  The 10-year notes have continued their decent (higher yield) and have now pressed to the lowest levels since early 2011.  Granted, part of the selling has been stimulated due to the potential government shutdown looming ahead for this weekend. The chance of that occurring appears slim for now, but the issues have not be fixed and one can pretty well count on this not being the last time we hear of it.  As I commented in the previous article, the potential ramifications of higher interest are many, including impacts on the dollar, equity markets and of course the economy in general.  To quote the immortal words of Bob Dylan, “You better start swimmin’ or you’ll sink like a stone, for the times, they are a changin’.”

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