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Futures File: Central banks; grains

Futures File: Central banks; grains

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Central Banks to the "Rescue?"

Markets worldwide skyrocketed this week on hopes that Europe's debt crisis could be alleviated by an infusion of loans from foreign central banks. On Wednesday, the central banks of the European Union, United States, Canada, Japan, England, and Switzerland announced that they would provide low-cost emergency loans to troubled banks. In addition to offering short-term support to the banks, this move also showed a renewed commitment by the world's economic powerhouses to saving Europe from its debt crisis, emboldening investors.

Some analysts warn that this intervention doesn't address the underlying problem of runaway government debt in Europe, making this a temporary fix, rather than a solution to the problem.

On Friday morning, markets gained more ground on news of stronger-than-expected U.S. job creation and a drop in the unemployment rate to 8.6%.

Following these news stories, many barometers of economic optimism were sharply higher. During the week, crude oil gushed $5 per barrel higher to $101.75 (+5.1%), gold gained $78 per ounce, reaching $1,767 (+4.7%), and the S&P 500 rallied to 1,260 (+9.5%).

Global Bankers Fail to Stimulate Grains

The announcement made by global central banks of a coordinated plan to inject liquidity into markets provided only a minor lift to the corn and soybean markets this week. Despite what appeared to be a potentially fertile trading environment for prices, corn, and soybean futures traded a modest 10 cents per bushel higher (+1%) after the mid-week announcement.

Plentiful rain in corn and soybean growing regions of South America were cited as the primary factor dampening U.S. grain prices this week. Brazil, soon to be the world's number one producer of soybeans, is expecting to increase exports this year. Rumors surfaced out of Argentina that a record 2012 crop could be seen in that major corn growing country.

Corn for March delivery was trading at $6.00/bu as of Friday morning, up 10 cents on the week. Soybeans for January delivery were trading at $11.37/bu as of Friday morning, up 31 cents on the week. Both markets are trading more than 20 percent off of their late-summer highs, which had been caused by dry Midwestern weather.

Opinions are solely the writer's. Walt Breitinger is the president of Breitinger & Sons LLC, a commodity futures brokerage firm in Valparaiso, IN. He can be reached at (800) 411-3888 or www.indianafutures.com. This is not a solicitation of any order to buy or sell any market.

 

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