Corn: It is warm and sunny out there for most areas and until we have a serious threat of frost, the market is likely stuck where it is for now. This market should remain cautious of a possible frost but is now staying just above $3. It is as if the market is telling us that it needs to see a serious call for frost before acting on it. If there is such a forecast there is no doubt the market will react very quickly. Much of the Midwest remains one to two weeks behind in maturity and recent forecasts are slightly more threatening. At noon today the GFS weather model pushed back the threat of frost to September 28th and 29th. This model is known for flipping its forecast around, possibly reducing the chance of frost as soon as tomorrow. It will need to be watched closely just as we have been doing for some time now. If the GFS model keeps this forecast the way it is today, still calling for a frost, then each day that passes without change should lead to more traders being confident in it. We are keeping our frost calls that were purchased earlier looking for the market to bounce to $3.60 should we get a frost as it was advertised today. If this does occur we want to be very active sellers and are not looking for it to develop a longer term trend. We can sell our calls and take profit, go short the futures and even look at hedging some December 2010. Our approach is to be short the market until a reliable frost forecast tells us otherwise.
Direction: Corn still has a range it can trade in easily between $3.00 and $3.30. On a low volume day like today there should be no surprise for corn to trade within that range. Again, in the futures we will remain short until frost proves otherwise. Even if there is a frost rally our expected direction is still lower by January.
Soybeans: There was talk this morning that the 35% import tax the U.S. put on China car tires would result in retribution in the form of China buying fewer of our products. There were some concerns that beans would be one of the markets affected but shortly after the opening those concerns were lifted. It is mainly a story affecting chicken and not as much for other markets. This news of the tax came out Friday and by Sunday night China had come in to buy beans. That should have eased concerns by the time the day trade opened up and other than some early selling, it was a low volume slightly higher day for beans. This buying was only found during the last few minutes of trade much like the selling at the end of Friday. Even though we found buying on the close early weakness kept a fast down trend in place. We are now at levels close enough to major support that beans may shy away from additional active selling until seeing combine numbers. From some people that I talked with today, it looks like we could see some Midwest numbers on early planted beans as soon as next week.
Direction: Now that beans have broken 900 we can see beans moving down to the next major support. We want to be sellers of beans, same as the corn with an objective just short of that major support level. Post harvest we remain with an objective of 810 so we will be looking to either sell or buy puts should we break that support.
Wheat: Today followed along much as expected. As we were saying previously wheat will follow corn with a bearish tone to it. That is why it is fitting that corn was down four for most of the day and wheat was easily 10 plus lower. We did not make new lows in this market today so we will wait and see if tomorrow sells off once again keeping a steady trend in place. Another day has gone by with no bullish wheat news. We can take a shot at buying this market now that we have not made new lows today but if we do end up making new lows we should stand on the side once again.
Direction: We are taking a shot at buying wheat today looking for another bounce. If there is a weather concern this would be a market to be long as it will not likely move as violently as the corn.
Ryan Ettner is a Grain Analyst and Registered Broker at Allendale, Inc. in McHenry, IL. Allendale is registered with the CFTC and NFA and is a member of the NIBA. www.allendale-inc.com
