Summary

The US Dollar continues to rise from the low set from the big drop Thursday. The US Dollar index price needs to reach 99.14 to recoup 50% of the disaster of a day that it had on Thursday post the ECB announcement. It has managed to reach 98.90 so far in intraday trading today. Outside of any major economic disruptions the US Dollar might trade sideways hanging in the balance in lieu of next week’s Federal Reserve monetary policy meeting. The upcoming anticipated rate hike could be a serious market mover.

Corn

March 2016 Corn gained 14.25 (3.88%) last week. The closing price on Friday was only a ¼ cent off the high. The price action made for a 38.2% retracement of the October 5th to November 16th decline. The high coincided with the December 4th date we mentioned last week as a potential timeline for this contract to turn back down. In early trading today prices have been under pressure. It remains to be seen how long the pressure will last. Last week’s problems in Brazil and the drop in the US Dollar aided in supporting prices. Those factors may not be present any longer. Current market cycles show a decline down into February. Two very import levels to watch in the coming month are the August 12th low of 368.75 and the October 7th high of 410. We are looking for Corn to make a top below the 410 mark and make another run to lows. We are looking for continued weakness through February 2016.

Soybeans

January Soybean rallied 33 (3.78%) cents last week. That was the largest weekly rally in Soybeans since the week ending July 2nd this year when it rallied 43.25 cents (4.32%). Last week’s rally was perhaps set in motion by a couple of events. The first was that on Wednesday December 2nd, the Brazilian lower house of the national government started proceeding to impeach the president of Brazil, Dilma Rousseff. Brazil is currently the largest Soybean grower in the world. The impeachment is expected to be a long political fight (possibly over a year). Speculators in the US seemed to have been betting higher on prices based on the belief that the impeachment process will effect government programs that help the Soybean farmers and exporters.

Then on Thursday December 3, 2015, the European Central Bank (ECB) chief Mario Draghi announced economic stimulus plans, which were smaller than expected. The ECB deposit rate is now -0.3%, which means banks must pay to keep money at the ECB. The ECB will buy 60 billion euros in equities each month until March 2017. Because this was below the expectation, the Euro had a strong rally and the US Dollar had a strong decline last week on Thursday.

These two unexpected events lend credence to the possibility of the higher lower that we suggested could occur this month from which prices could advance in January and February. Prices are weaker in intraday trading. We are looking for the March contract to post a correction that holds the 860 (865 for the January contract) in the coming weeks. On Wednesday, December 9th the next WASDE report will be released. This report should be very import as it historically sets the tone of the trend to expect for the first quarter of the year.

The next day on the 10th, the new Argentinean president will be sworn in. The government announced plans to remove or reduce export taxes immediately when the new administration takes power on December 10th. They will eliminate the 23% tax on Wheat and the 20% tax on Corn and reduce the 35% tax on Soybeans by 30%.

Wheat

Australia cut its Wheat crop number from 25.3 million to 24 million tons because of drough, fire damage and frost. Wheat futures contracts we down early in the week but those losses were pared off with huge rally on Thursday with some follow through on Friday. March Wheat ended the week postive 5.50 cents (1.15%). It was up in early trading on today but has not been able to hold those gains. The speculative short position in Wheat continues to grow to record levels. Funds are currently 108,000 contracts short. This massive short position makes for potentially huge short squeeze rallies, which is perhaps what happened on Thursday when the US Dollar sold off. The perceived weakness made for strength in the Wheat complex.

Crude Oil

OPEC members failed to agree on a Crude oil production ceiling Friday. Iran insisted that no cuts in production be implemented until it had restored output that was lost by way of recent western sanctions from the last several years. Members ended their meeting with no agreement to ease production. The pipelines will continue to flow as strong as ever. The Impasse sent crude oil prices spiraling Friday and today as we could potentially see production increase in the weeks and months ahead.