Weekly fundamental grain report for Nov. 10

Allendale Wrap-Up 11/9/2009

Corn: For about a week now grains have not followed the outside markets nearly as much as they had in the prior month. Today was a change from that trend. Corn started the day 5¢ higher, as was expected, seeing a small bounce after the fast sell off seen for most of last week. When corn opened, crude was working its way to being $2.50 higher and the dollar had just made new contract lows. Even though corn had been trading more weather forecasts and early yield reports last week there was no way they could possibly ignore contract lows in the dollar. It was a good size bounce that was more of a slow grind higher, which would tend to indicate it is more sustainable than our sudden jumps higher that are quickly sold off later. Now we will see what the USDA gives us tomorrow. Trade estimates are looking for a yield of 163.7 million bushels, which is a reduction of a half million bushels from last month. It was that reduction which caused the early bounce in corn. With that estimate out there we now need to see a reduction to be neutral tomorrow. Part of the bounce today was factoring that in. There has been a good amount of talk that this report needs to be ignored as the numbers were put together before corn harvest had made much progress. What is normally a report that we can start to get a real feel for is now just another prediction of yields and not solid numbers. It may be more important to see what the USDA does with acres and on the demand side. Funds were buying again today so let’s keep this in mind. Some support came from expected yield pull back but most was fund money buying and is still subject to possible sell stops at any time given good or bad yields.

Soybeans: We were given a great week and weekend of harvest and the numbers show it. This afternoon we saw a bean harvest progress of 75%. Most of the producers we are talking to will wrap up bean harvest at some point this week for those not already done. What we saw at the start of the market was buying back some of the aggressive selling last week. That is fully expected as it is more than common to see some position squaring right before a crop report. Outside market influence took care of the rest. It was evident that beans did not see the same percentage higher but this market is also looking for a slight yield increase tomorrow to 42.7 million bushels. What we saw today was more of what we would like to see from outside market influence. Steady buying that was not overdone and warranted due to major moves in outside markets. This is a change from previous moves where grains react violently from only minor outside influence. It is easy to see from last week that what fund buying can give they can also take away. Today’s rally only managed to get beans back into the low end of the sideways pattern seen recently. After the report comes out tomorrow, a good weather forecast and fast harvest progress will weigh on the markets. This is if the outside markets are not bullish suggesting more spec buying however. Fast harvest progress does not translate into better yields but we have to remember how much premium was built into this market just from slow harvest, which needs to be taken out. In the end, funds hold the trump card and can play it at any time. What does not look good so far is on the last rally they failed to buy enough to even break the Oct. 23 high, which does not give us great confidence that another surge of buying will do it either.

Wheat: No surprise here, yet again, in wheat. If you see the dollar moving, the appropriate action to take in wheat is to do the opposite. There is still no reason to be bullish this market but as always the dollar wins out over all in this market. While other grains have been influenced by outside markets and other times not, wheat remains highly tied to the dollar. Any suggested trade needs to be backed up by the dollar or should otherwise be entered only with great caution.

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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