Futures Commentary – October 14th, 2011

Equity and commodity markets moved higher this week leaving recent lows behind.  The Dow benefited from good news coming out of the Euro zone and is up 374.64 to settle at 11,477.76 today.  Oil saw improved demand prospects from the strengthening economy adding $1.62 a barrel to close at $84.47.  Gold moved up $31.40 an ounce to $1,661.50 while the dollar index moved sharply lower this week reigniting their inverse relationship.  The commodity markets were supported by the weakening dollar.

Corn saw a limit move higher on Tuesday. This move helped the grain add 38 ½ cents this week to close today at $6.38 ½ on the December contract.  Sparking the market higher was the fact the Russia will be adding a levy to grain exports above 24 MMT.  This fact coupled with a weaker dollar opened the door for gains.  The USDA also published their most recent Supply/Demand and Crop Production reports, which were viewed as mostly neutral.

Soybeans has led the charge higher for commodities this week adding 98 ¾ cents to the November contract.  This market was severely oversold, after a $3 sell off from highs of 6 weeks ago, which led to profit-taking and position-evening ahead of the USDA reports on Wednesday.  These actions lifted the market 58 cents on Tuesday alone.  Planting progress in South America is moving slowly adding support to the rally.  Export sales will be an important catalyst in the coming weeks as the dollar index continues to slide.

Wheat has been a drag on agricultural commodities of late, but did managed to add 10 ½ cents to the December CBOT contract by the close Thursday.  Russia’s announcement coupled with a weaker dollar index has added support.  The USDA surprised this market Wednesday by raising carry out numbers and world stocks to relatively high levels, sending the market 34 cents lower that day.  Again, export sales will be an important driver in the weeks ahead.

The equity and commodity markets are out of the shadows and into the light this week as positive economic news and a weaker dollar have boosted prices.  Going forward, export sales and South American planting progress will play a role for the grain markets as we near the end of the growing season domestically.  The USDA did not surprise the markets too much, but did spook the wheat market a little.

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