Allendale Wrap-Up 9/28/2009
Corn: There are a good number of rumors as to why corn was supported today. One was talk that China may import corn due to loss of production from both drought and frost. While that is being discussed it is strongly felt that China will not be an importer of U.S. corn so we should be cautious of thinking that could cause a rally. There is also talk about disease lowering the potential yield of corn. Mostly, from what we have heard, if an entire field is diseased that may be the case but so far we have not run into anyone mentioning large enough amounts of disease to result in yield loss. What disease may turn out to be is more of a reason to dock corn due to poor quality rather than market moving reduction of yields. Frost is a concern that is really starting to fade and quickly. There was talk of frost today but now it has been pushed back to Oct. 11 and 12 before it will impact the Midwest. With a date that late, the market should not see much reaction unless the date is pushed up. Another issue that we want to throw into the mix is that the funds are short corn and it is possible they are cleaning up some books before the end of the quarter on Wednesday. As it turns out, most of the talk listed above can be dispelled as solid reasons to get bullish the corn which is why we stick with the idea of seeing rallies in corn to be a selling opportunity. High amounts of stocks with a potentially large yield are not the ingredients we want to start getting bullish in a market.
Soybeans: As expected many people have started harvesting their beans this week. Yields continue to come in slightly above expectations for most areas with a few exceptions of course. This is likely to be one of the reasons why beans did not participate in the support found in the corn. As mentioned for corn, another reason could be funds selling beans as they are long this market before the end of the quarter. It was a very thin trade today with most of the activity found at the end of the day which saw mixed to lower action in the last 15 minutes. This is another market where we still see rallies as selling opportunities. There is a large window to move lower before finding major support and breaking that could lead much lower from there. What we want to suggest to those in their combines is to sell cash beans immediately from the truck or lock in a basis contract. We say this because the delta will be out in the fields harvesting aggressively as well as combines going full force soon. There is no need to keep the basis good through harvest. We can always buy these beans back on paper, what we can’t do is give ourselves a good basis by slowing the harvest for everyone else.
Wheat: It is another day where wheat does not give us strong ideas about future direction. While it did not fall off after breaking the $4.50 support, it also did not bounce back very much higher. Spring wheat harvest is wrapping up and current weather is seen as bearish for planting thus far. While there is some talk about acres of wheat being reduced next year there is also going to be an opening up of some CRP ground that would be primed for additional wheat planting. We look at this market as one to either sell or stay out of. The one thing that is well agreed on is that there is little reason to think of it as a buy at these levels. As mentioned in the other two grains the funds are short wheat and could also be cleaning up their books slightly and buying before the end of the quarter.
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
