Demand and Global Outlook

Large speculative commodity funds can greatly affect the market [1]. Fears of another recession drove liquidation of bullish in wheat (13,495 net-long contracts to 11,150 net-short contracts) in a week [2]. Our T.A. Andrew said that large losses in other markets (e.g. gold, bonds, etc.) might lead to liquidation of positions in agricultural commodity markets the following day to allow the funds to pay their margin calls. So if there is a lack of solid news regarding demand for commodities, watching out for large movements in other markets can be a worthwhile strategy.

Corn: Larger than expected supplies could be indicative of less international demand and substitution with wheat from feedlots after corn [3]. Although lower prices might stimulate international demand the US faces competition from Argentina, Brazil and Ukraine [4]. Taiwan signed a deal to purchase 7.7-10.5 million tonnes of US corn in 2012-2013 based on the Intertemporal LOP this should raise the price of December corn [5]. But without sustained demand the price of corn should fall this week.

Soybeans: Record high production of soybeans from South America coupled with a reduction in global demand for soybeans suggest a bearish outlook for soybeans [6].

Wheat: The feeding demand of wheat is not strong. [7]Moreover, according to the report from US Agriculture Department, the production of wheat is bigger than forcast. Therefore, the price of wheat might decline this week. [8]

[1] http://www.commoditycharts.com/story/id=1742858 [2] http://www.bloomberg.com/news/2011-09-18/hedge-funds-cut-bullish-bets-on-commodity-prices-amid-contraction-fear-.html [3] http://www.agrimarketing.com/s/70062 [4]http://www.agweb.com/blog/Farmland_Forecast_148/yield_expectations_decrease_leading_into_harvest/ [5] http://www.asian-agribiz.com/display.aspx?PageID=0&MemberID=0&screenheight=800&screenwidth=1280# [6] http://www.asian-agribiz.com/display.aspx?PageID=0&MemberID=0&screenheight=800&screenwidth=1280# [7] http://community.nasdaq.com/News/2011-10/preopening-wheat-market-report.aspx?storyid=96792 [8] http://www.kfgo.com/agri-business-news.php?ID=9408