GrainAnalyst.com Premium Subscribers: Be watching for Matt’s special report next week on the upcoming WASDE.

By Michael Hirtzer

CHICAGO, Jan 5 (Reuters) - U.S. corn, soybeans and wheat rallied on Wednesday a day after a sell-off in commodities drew investors to grains, with soybeans surging 1.7 percent on talk of Chinese demand and concerns over Argentine crop weather.  U.S. corn futures rose after hitting a two-week low early even as the dollar rose about 1 percent on signs of an improving U.S. economy. [USD/]    Wheat futures also climbed after opening lower, led by futures for higher-protein wheat at the Kansas City exchange.    “Nothing has changed fundamentally. Everything went down on profit-taking and liquidation but the fundamentals are still bullish,” said Matt Pierce, analyst for GrainAnalyst.com. Wheat prices have been supported by excessive rains in Australia downgrading the wheat quality, while hot, dry weather in Argentina has supported both corn and soybean futures.

Chicago Board of Trade March soybeans were 19-1/2cents higher at $13.89 per bushel and March corn up 3-1/4cents to $6.11-3/4 as of 10:50 a.m. CDT (1650 GMT).    CBOT March wheat was up 4 cents at $7.93-1/4 and KCBT March wheat  up 7 cents at $8.56-1/4. Light showers this week benefited the pollinating corn crop in Argentina, but more dry weather is forecast and that could stress soybeans as the crop begins to set pods, said Don Roose, analyst at U.S. Commodities in West Des Moines, Iowa.    “The soybeans still have the crucial time frame to go through yet (in Argentina) and we’re supposed to warm up again,” Roose said.    “So it goes back to some of the same factors: China underneath the market on these breaks and we’re still not sure of the supply out of South America,” he said.  China was seeking shipments of U.S. soybeans for shipments in March and November and also shipments from Brazil this spring, analysts and traders said.  Jeffrey Currie, Global Head of Commodities for Goldman Sachs, on Wednesday said soybeans are a more attractive investment than wheat due to greater potential demand growth and limited supply base.  Soybean and corn futures eased for the first two days of the week after each commodity hit 29-month highs.    Investment funds have been heavy sellers while index fundshave also started to rebalance commodity holdings.    The dollar index  touched a one-week high following news that the U.S. private sector added more jobs than analysts expected. A stronger dollar makes U.S. commodities less attractive to exporters.    But commercial firms bought soybean and corn futures to take advantage of the break in prices.  “The market has been down three days in a row, it was hit hard so it’s due for a correction. Also, commercials were buying beans yesterday and again today,” said Glenn Hollander of Chicago cash grain house Hollander-Feuerhaken.    “We saw a broad-based commodities sell-off yesterday and the pressure is continuing today as the dollar is a bearishfactor for commodities,” said Ker Chung Yang, an analyst at Phillip Futures in Singapore. “For grains, losses should be capped because of unfavorable weather in U.S., eastern Australia, China and Russia. The weather issue is still lingering and investors can’t really overlook it.”  Grain and soy markets are unlikely to fall too far going into the U.S. Department of Agriculture’s Jan. 12 monthly supply and demand report, analysts say.

These are the current estimates for Friday’s WASDE Report:

Matt Pierce shares this article: Congress likely to cut US ethanol aid, not end it

By Charles Abbott   WASHINGTON, Dec 6 (Reuters) - Congress is likely to extend the major U.S. ethanol incentive, rather than let it expire at the end of the month, but it will cut the tax credit by 20 percent or so, an analyst and an industry spokesman said on Monday. Mark McMinimy of Washington Research Group said the most likely outcome was for a one-year extension of the tax credit at 36 cents a gallon, down from the current 45 cents.   The Renewable Fuels Association, a trade group, said it believed ethanol was part of ongoing discussions for an omnibus tax bill dominated by estate and income tax rates. A business lobbyist also said ethanol was believed part of the talks.   If included in the omnibus bill, biofuel provisions were expected to be similar to a proposal last week by Senate Finance Committee chairman Max Baucus — a 36-cent excise credit for ethanol, an 8-cent credit for small ethanol producers, extension of the 54-cent ethanol tariff and revival of the $1 a gallon biodiesel credit. [ID:nN03140185]   “I think the industry would take that without looking twice,” said McMinimy. He cautioned lawmakers could reduce the credit below 36 cents, and agreement on a tax will was not a sure thing.   RFA spokesman Matt Hartwig said the Baucus provisions could be an early look at the likely final result of congressional action, a view held by others in the ethanol industry.   “Is 36 cents better than zero? Absolutely,” said Hartwig, but he added the industry would continue to seek a higher support rate or a longer-term extension.   Production could fall by as much as 10 percent if the credit lapses, says the industry although some analysts say the drop-off would be smaller. A 2007 law guarantees ethanol and other renewable fuels a share of the motor fuel market.   Ethanol trade groups signaled during the summer they would accept lower support rates and other reforms in exchange for a long-term extension of subsidies. Foodmakers, livestock producers and environmentalists want to end the ethanol credit.   Besides reducing U.S. reliance on imported oil, ethanol boosts grain prices and creates jobs in rural America, say industry leaders. There are more than 200 ethanol plants, mostly in the U.S. Midwest, each employing four dozen workers.

The day session looks to open stronger than the overnight with momentum only gaining, not fading. Beans are called 20+ higher to open, Corn is called 8-10 Higher, Wheat is called 20-25 Higher, Bean Meal is called 1-2 dollars Higher with bean oil called 70-90 Higher.

Commitment of Traders as of Nov 23rd:

Wheat S 22,117 marginally shorter than previous week.

Corn L 336,111 43K weak longs left the market.

Beans L 162,911 gained 2,500 longs.

Oil L 46, 370 lost 7000 longs.

Meal L 40,373 gained 1,000 longs.

Going back to the obvious differential between wheat and corn you can see why I like the relationship value of wheat at current levels.

—Matt Pierce

Macros are mixed this morning with crude holding and adding to early gains against a collapse in the Euro against the USD. This will hamper any exaggerated rally… I think that’s another reason to look at selling volatility.

Gold is trading 2.70 Higher sitting at 1,365.10. This is a solid upside move fighting off early negativity.

Crude is trading .80 Higher sitting at 84.56 as of 8:20 CST.

The Euro is .0167 Lower trading at 1.3116 versus the USD. This is a direct response to the Irish bailout and talk of impending problems with Portugal and extended problems in Greece.

The Yen is .34 Higher against the USD trading at 84.24.

Matt Pierce’s appearance on Bloomberg has been delayed due to what Matt’s is calling a “brutal” close in the grains that requires his attention. We will post and tweet the updated broadcast time when it’s known.

China’s traditional play in beans has been to sell close to the money puts to help finance their insatiable cash demand for beans. Today we saw MF Global sell 2,100 sh 1140p, buying 700 sh 14-18 call spreads putting 60-cents in the bank. If this is a new method by China, the bean market all of a sudden looks extremely bullish. This play states that China feels beans should advance well over $14.00 by the end of Feb. I believe this is a very bullish situation that needs to be noted.