Weekly fundamental grain report for Oct. 27

Allendale Wrap-Up 10/26/2009

Corn: Early calls were for slightly higher trade following the overnight as well as the fact that outside markets were looking supportive. That is until just before the grain opening. Shortly before the opening we saw a bounce back higher in the dollar index which may have put the funds on the sideline for the opening bell. Suddenly what might have been otherwise average selling was met with no one on the other side of those sell orders. It has been the funds that have been willing to buy this market even given large potential yields. When the dollar gave the signal for funds to stand aside that was all it took for some normal to slightly above average selling to move the market. Shortly after that, corn reached the 200-day moving average where fund sell stops were found. Now given those stops and a continuing higher dollar we changed the funds from the major support to being sellers. Sources from the floor estimated the funds long about 218,000 contracts before the opening. Being that long in corn now makes this market more sensitive than ever to changes in the dollar. Weather does look to make some small improvements as well. This week is now expected to see less in the total amount of rain expected.

Soybeans: This morning most of the grain market talk was involved with just how much damage will be seen in the delta from all the rain seen down there. Estimates have been made as to how much damage we are talking about. In general thoughts have been for 40% damage in that area. There is also a large amount of harvest yet to be done. Most of the producers that we are talking with are telling us on average they are half done. USDA gave us a harvest progress of 44%. We have been hearing talk of harvesting beans as high as 20% moisture. Recent forecasts are giving a small window at the end of the week. This could lead to quite a few beans to be harvested. If some producers are willing to take off 20% moisture beans it is a general sign of what many will do given another small window for harvest. Given the potential damage in the delta it must be mentioned that this market was also subject to selling due to a higher dollar. In all, when the slide was over today beans stayed within the sideways move it has been in. A break below $9.71 would be retracing the initial buying which started the entire grain rally in the first place.

Wheat: Proportionally the wheat saw the largest slide off all the grains. This should not come as a surprise as the dollar has moved this market violently higher and a bounce in that market will cause a fast move lower as well. Current forecasts call for snow in areas that need to get wheat planted. This still does not mean we are following weather as our guiding force for trading wheat. Australia wheat production is now seen to be 23 MMT based on good weather. Between production in other countries and the large amount of spec buying under fire with the change in the dollar this is a tough market to buy.

Ryan Ettner is a registered broker and grain analyst 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

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