Views on commodities and energy
Quiet CBOT trading period as holidays approach
Chicago Board of Trade markets are in their traditional holiday trading pattern — volume light and prices range-bound amid a lack of market enthusiasm. No one wants to get too aggressive, especially under the gloomy economic outlook. Traders who’ve made money this year are happy to sit tight and see what the new year brings.
Given last week’s big sell-off in CBOT markets, with spot corn falling below $3 a bushel for the first time in two years, soybeans slipping under $8, their lowest price since May of 2007, and Chicago wheat hitting a 20-month low, it’s safe to say the grains are oversold.
In fact all commodities took a big hit last week. The Reuters-Jefferies CRB index <.CRB> of 19 commodities saw a record weekly fall of 14 percent amid the deepening recession fears and U.S. monthly data that showed 533,000 jobs were axed in November — the most in 34 years.
“If crude oil bounces, we’ll bounce. At some point in time we’ll start to talk about the optimism of change with Obama,” said Don Roose, analyst with U.S. Commodities in West Des Moines, Iowa. “Week by week we’re getting closer to that kind of a set-up.”
Maybe the drop in CBOT prices will bring in some fresh export tenders, analysts say. Many traders are hoping that at the very least Egypt will step in for some U.S. wheat, breaking the recent trend of Russia and France nabbing the sales.
Corn export sales remain disappointing, losing market share to cheap feed wheat. So far, U.S. corn export sales are off 47 percent from a year ago. That kind of a number has some analysts expecting USDA to trim its export forecast in this week’s monthly crop report on Thursday.
In contrast, soybean sales have been stronger than expected this season due to China’s voracious appetite for soy. But there is some doubt about future Chinese demand as it is building a plentiful stockpile for its state reserves, analysts say.
On the supply side, the U.S. harvest is done for all intensive purposes — even if the western Corn Belt is still struggling to get the last, or 5 percent, of its corn crop in. The biggest problem appears to be the high moisture content of the corn, which takes time to dry down. Many farmers may just leave the crop in the field until spring. Any state crop reports issued Monday night will give traders a better insight.
South America weather is improving for the planting and early growth of its corn and soybean crops. Southern Brazil could use more rain but is expected to see showers late this week.
“That’s going to be an important rain event to maintain favorable conditions,” said DTN Meteorlogix forecaster Mike Palmerino.