Market Report

Markets 1/11/16 11:57am

Dow -13.28
S&P -7.73
Nasdaq -33.54

Oil dropping aggressively this am.  Oil prices dropped another 10% last week, sitting at 12 year lows.  Current low 31.55, looks as if oil in the 20’s is reachable.  Especially since oil companies have been producing about 1 million barrels per day more than is used.  Total US inventory is 25% more than last year this time.  Laws of supply and demand rule, and with a glut of oil like this, crude will be hard pressed to do much of anything but move down, and reduce profitability for ethanol and crush processors.  I wonder if government “bail outs” are in the future for U.S oil companies.

Grain Markets 1/11/16 11:58am

March Corn -7’2 @ 3.49’6
March Beans-5’0 @ 8.60’2

USDA report around the corner, much of what I tell you will soon be tested as of tomorrow.  I will add funds are very short, so a friendly surprise could cause short covering.  At some point funds will have to cover, hopefully this gives us a selling opportunity.

USDA announced some sales this morning – 120 T of beans to China and 248 T sold to unknown in 15/16 and; 152 T of corn sold to unknown in 15/16.  This helped the beans rally after the morning break but they are currently struggling.

Corn – The fact that $3.50 has held on nearby corn is a good thing.  Though it broke, it never held.   We are making a run at $3.50 again this am, and the continued pressure makes it appear less and less likely to hold.  Oil prices continue to pressure ethanol producer margins, exports are behind pace.  As the market trickles down, basis values firm up.  Giving producers an opportunity to get some basis levels set on old crop hedges, or basis contracts for future deliveries.

Beans – Exports behind pace and the USDA is likely to adjust.  Current record yield could be pushed higher thus increasing ending stocks.  Economic uncertainty in China certainly doesn’t help the export picture, nor does the strong US Dollar.  In general the trade expects a bearish report, so the questions is, is the news already built in?

Greg Mockenhaupt

ProEdge Risk Management Consultant

P: (402) 685-5613 | Greg.Mockenhaupt@cvacoop.com

1007 County Road O

Oakland, NE 68045

www.cvacoop.com