Allendale Wrap-Up 10/5/2009
Corn: Spec buyers were finally able to take out the $3.47 3/4 level today. It was a slow move higher from this morning where we were called to open 2¢ lower, which we did but then slowly traded higher before stopping just short of the resistance level. That is where corn stayed for a while before enough of a push to get December corn to $3.48 and stops were hit. Those stops took us to the highs of $3.50 where the spec buying ran out and corn began to set back. Managed money has been buyers of corn recently which accounts for a sudden end of the buying when the resistance was taken out. Now that stops have been kicked out of the corn market at $3.80, a setback can be expected as we approach the crop report on Friday. Only a close above $3.50 would cause us to slow our selling at this point. Producers continue to tell us that a good size crop is out there. When it comes to a frost many producers to the north are also telling us that some damage can be expected but not to a large extent. This means their corn will not officially be listed as “mature” by the report today but most are only looking for “small damage”. It has actually gotten to the point to where they will accept the damage if it means freezing the beans to take care of green stems. There is a freeze expected this weekend but from what we have heard, we will continue to sell those rallies. That is what our producers are telling us, that is what the fundamentals show and now the spec buyers may slow their buying all of which tells us to sell.
Soybeans: Beans were the market that was least affected by spec money today. While some support can be expected from recent rains slowing harvest, the beans found most of their support following corn today. As stated Friday the reasons are endless to be bearish the bean market but now that it has seen a significant break a small bounce would not be out of the question. Unlike the corn, managed money has been a seller of beans recently which does not support a come back and helps to explain why beans were not proportionally higher along with corn. At the close, when corn started to fade so did most of the support in beans. That does not look good for those bullish the bean market not to have a strong close after a large sell off the previous session. Only a few producers were out in the combine today as most were sitting still and looking to stay that way for some time. There is no break in the rains until next week. Also we are looking for a freeze Sunday night which should allow for a much faster paced harvest than the market has seen lately. There was only moderate trade which failed to offer a strong close. Yield reports remain solid with most yields coming in near expectations and as many as 8 bushels per acre more than expected. This is another market that we are comfortable selling. Our target for beans remains at $7.80 to $8.10. At the moment there is nothing on the horizon that would suggest we will be turning this market around. To just get back to the downtrend line the beans need to get back to about $9.25. There are few who believe we can even accomplish that.
Wheat: There was early support today so there are questions where it came from. This was spec buying from the funds and there a few reasons that stick out at us to prove that. Managed money has been buyers of wheat recently and wheat was subject to broad based commodity buying. To show this we should look at when the buying started in wheat. For the most part the initial kick higher occurred at 10:40. Here are the other markets that were subject to fund buying at 10:40 this morning:
- Gold
- Silver
- Crude
- Cocoa
This is also when the dollar sold off, a market the funds key their buying from.
For those still looking for fundamental news in order to buy wheat we have to say that we are just not finding yet. All the support that can be found in this market remains spec or technical buying; still nothing that suggests a turn around anytime soon.
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
