Gary Wilhelmi 6/22/2012 Weekly Column

A European news source said of the G 20 meeting,” they just stand around sipping cocktails” and indeed they did as was the case, for our out of ammunition Federal Reserve. The negative outlook produced by the FOMC was disheartening but not surprising. As weak as our economy is it’s better than those of Europe, save Germany.

Spain and Italy are on the brink of implosion and we face a fiscal cliff, at the first of the year, when tax cuts expire and we have no kindling for the fire. China is posting soft PMI data as their economy grinds down to a 7% growth rate from over 10%.

The S&P 500 support is down at 1275 some 50 points away and crude oil has fallen from $108 per barrel in April to $78, and some of my long term chart associates see $40 as a potential target, or maybe worse. That would be good for our gas tanks, but an oppressive sign for the over all economy. The dollar index at 82.40 is at resistance and that hand cuffs exports. Chairman Bernanke had nothing but wishes and hopes for the EU and that don’t stoke the fire.

The electronic scalpers continue to rip the grains and oilseeds back and forth in a trading frenzy. At least at the casino, when you lose your shirt they will buy you a drink, but not so in the markets.
Dryness reaching back into our mild snow less winter is literally a growing problem as corn and soybean ratings are at five year lows. The western Corn Belt has faired better, Iowa corn was unchanged at 67% good to excellent last week, but Indiana is at 37% versus a 61% long term average. Our old crop supplies are so tight that an explosion up into the high teens is possible in beans and we need a 3 billion bushel crop this year with 14 billion corn. The weekly crop condition reports are in their prime time with no survey estimate until August, so fasten your seat belt. The dollar at over head resistance stymies exports. You hear a lot of uninformed talk about the dollar, the trend is what counts, not day to day, and it is pointed up. Our economy is sluggish and likely will be into next year, but we are better off than a crumbling collection of European economies.

Also watch the slowing of Chinese growth from 10% to 7%, India is likewise in a slowing mode.
Wheat ratings have also beaten a retreat and looking ahead dryness in Russia, East Europe and China are market makers. The Black Sea futures at the CME will offer an interesting comparison of major producing areas.
At the end of the month we have the final plantings report and Quarterly grain stocks.

The stocks report is our prime measure of domestic usage and is often used to correct previous errors, so always tread lightly. Check out the plantings, but what really counts is what Mother Nature allows us to create.
In determining your marketing strategies take the long view. If you like to trade do so in small amounts as the spec driven volatility is nonsensical and dangerous to your pocket book.

Boxed beef is at a record high and so are cash hogs and pork cutout. Considering the questionable economic back drop be prepared for corrective action in the red meats. Cattle are trading well below break even levels and both cattle and hogs are facing potential sharp escalations in feed prices. Cash cattle bids and offers on Friday were $116 to $121. The cattle on feed report were expected to feature 114% placements. Watch for a pick up in hog slaughter, which would serve to shave values. Cattle kill last week topped 650,000 and that plenty.

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