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Market Plus: Dec 03, 2010: Elaine Kub

posted on December 3, 2010

Market Plus: Dec 03, 2010: Elaine Kub Pearson: This is the Friday, December 3, 2010 version of Market Plus. Thanks for joining us here at our Market to Market Website. I'm Mark Pearson. With me this week our analysis Elaine Kub and I think we want to talk about some technical stuff. You brought up a head and shoulders formation perhaps showing up in corn and maybe the other grains as well. Talk about head and shoulders, what are you looking for, what kind of price targets are we going to have to hit to make the shoulders -- or to realize that we've seen the shoulder, see the head, and then see the other shoulder?

Kub: Well, like you say, I mean, it's pretty straight forward. You get a little spike up and then a bigger spike taller and then another little spike up and then you go down. That tallest spike is your top. That could be happening in corn. You know we could have that first shoulder in. You know the highest close in November was five eighty-four and a half. So, how far up would it go for the head? You know you kind of get up in no-man's land there. There's no, you know, other than a moving average or some other sort of calculation like that how do you know where that head would come in at? Sometimes it could be a psychological thing. There's no set pattern of how much higher the head has to be than the shoulders. So, I'd say, you know, your six dollar level would be a good psychological stop there and if they can make it through there then I'm completely wrong and that was just a little blip on the market.

Pearson: It's hard to see that technical pattern really develop until you get yet another spike. So, I see what you're saying. But if you see the other spike that would be a big hint to you to take advantage of it.

Kub: Yes, exactly. Yeah, if you get the other shoulder in and it starts moving down it may just continue moving down. That's the idea of a head and shoulders.

Pearson: Ok, what other technical factors out there? Obviously, I mean, these funds are looking at these technical factors, producers are looking at them, commercials are looking at them. When I see that big move back in August on the wheat -- Ok, for us to stay in a bull market we have to take that out relatively soon correct?

Kub: Yeah, you know, so you say that all these grains are moving together. Well, corn and soybeans both seem to be making that head and shoulder, but wheat is a different looking chart. It is. It's been really sort of flat and neutral up until this point and I would still call the wheat chart neutral until it can take out that eight twenty-two high on the front month Kansas City Contract's Chart. You know if it doesn't take that out then I think we just keep moving neutral.

Pearson: Ok and then we wait for a move one way or the other.

Kub: Yeah.

Pearson: Ok, alright. Let's talk a little bit more about the soybeans. We talked about South America and the weather situation down there and the fact that we're on a hair trigger because China just continues to be this huge buyer. Soybeans in China, I think the last time you were on you told me they were like seventeen dollars a bushel. So, they've still got some -- We're still cheap to that.

Kub: Yes. Yes and because as you mentioned the oil prices, you know, fuel prices haven't increased. That means your freight prices haven't increased. The economy hasn't suddenly come up with more exporting and importing it needs to do. There's -- so there's still plenty of cargo vessels available. Yeah, the shipping it to China is still relatively cheap compared to 2008 for instance. So, as long as they need it and they're paying for that much on their land it certainly makes sense for them to buy it here and ship it over there.

Pearson: Alright, yeah we've got the definite cost advantage there. Why aren't they going to South America as much? We thought we'd see some of those sales start to be re-done to South America. We haven't had that happen.

Kub: Well, part of the cheaper freight and the cheaper moving of it takes advantage of that. You know you can move in different ways that you don't ordinarily do and that's going to come into play for wheat also. There's countries that ordinarily buy from Australia that simply won't be able to buy from Australia and this year, this 2011, if it comes to the situation where Australia truly doesn't have enough to export it will be easier for them to come to the U.S. because of these freight opportunities.

Pearson: Alright, Elaine Kub as usual some great insights. We appreciate you being with us on Market to Market this week and of course here on Market Plus as well. And by the way if you're watching us on Market Plus this is fundraising time on PBS and if you enjoy the information you receive here on our Market Plus Website and you'd like to support the program you're more than welcome to that through your local PBS Station and be sure to ask your local PBS Programmer to carry Market to Market on their local public television station. So for Elaine Kub and all of us on Market to Market I'm Mark Pearson thanks for joining us. Have a great week!

Tags: agriculture commodity prices markets news