One Step Forward Two Steps Back

Posted by Nogger - a legend in his own mind at 12:57 | Categorized as

17/11/10 -- A seesaw overnight session closed with beans around 10-12c lower, corn down 2-3c and wheat up 8-10c.

The Chinese State Council said that they are indeed planning on intervening in their domestic grain, oil, sugar and cotton markets in an attempt to stabilise prices. Some may dismiss that as just words, but the Chinese don't have a reputation for pussy-footing around.

A clamp down on speculation in the commodity markets in China is also a real possibility, as too are interest rate hikes and further monetary tightening such as restrictions on bank lending.

With year-end approaching that seems to constitute enough uncertainty to bank some profits and regroup in the new year for many.

Chinese grains and vegoils all finished around 3-4% lower overnight.

The overnight Globex grains were all sharply lower early this morning, but managed to stage something of a mini-revival by the close of play.

Whether any further price falls represent a buying opportunity remains to be seen. In the case of CBOT corn we've now seen three limit, or near limit, movements in a row. Friday down, Monday up and Tuesday down again. The soya complex hasn't been too far behind either.

Since Thursday night we've seen the following falls in CBOT contracts: Jan beans -131 3/4c; Dec soymeal -USD29.30; Dec soyoil -586 points; Dec corn -40c; Dec wheat -69 1/4c.

I'd be inclined to say that that little lot is probably a big enough shake-out for now.

One point the market seems to be missing is that maybe Chinese government intervention in the markets is bullish not bearish. It would be just that if it means large-scale domestic buying to shore up dwindling state-owned reserves. That could also spell increased imports of grains and oilseeds.

The US weather offers only limited precipitation possibilities for the HRW wheat areas during the next couple of weeks. There are still some dryness concerns in parts of Argentina and Brazil.

Early calls for this afternoon's CBOT session: beans 10-12c lower, corn down 2-4c and wheat up 8-10c.