Weekly fundamental grain report for Nov. 17

Corn: Rain, outside markets, option open interest and ethanol prices are all reasons for a move higher today. To start off, the rain is the first and most obvious factor we can look at today. Areas of MO, southern IA, IL and IN are getting rains they definitely do not need. It has been raining over most of these areas for three days now and this system is not expected to move out for another two days at least. Harvest progress is likely to get even slower as they are already behind. After this system moves out, the extended forecast does not offer much for help either putting in continued chances for rain next week as well. Outside markets certainly offered support as well. With the dollar trading lower, even if the influence of outside markets does not give the support it used to, new contract lows in the dollar and $3 higher crude trade won’t be ignored. Option open interest comes into play as well. In general, the market tends to gravitate to the strike with the most open interest. Right now both the 400 call and 400 put have the largest open interests of any other strike around. That means for this week the market is likely to try and gravitate to that level. We saw that happen today with moves above 400 finding little additional support and moves below it quickly bought. We should look for the trend to continue unless we get enough other information that can move this market far away from 4 dollars as slight adjustments will just end up moving back to $400. Ethanol prices are at their highs for the year right now. See the ethanol price chart for yourself on the Food for Thought page of this Advisory Report. Even if supplies are large for corn, it shows that ethanol can pay higher prices for corn right now and still be profitable. We found our support from various areas and the options would suggest that corn can hold the 400 level for this week.

Soybeans: Today saw a round of active buying in beans that is not nearly as well supported fundamentally or technically as the corn. Trade took the beans to a high just over 1010 and right up to a down trend resistance line. We have seen big runs higher in beans and large runs lower as well but overall the trend is lower with all this volatility. Given that trend moves above 1000 have provided good opportunities for selling. Now that harvest is coming to a close, fundamentals are backing up a sell order more than ever. There is little doubt that outside money is in this market once again and there is some influence from outside markets as well. Even given this buying, it is starting to look like there are fewer reasons to be bullish. Harvest delays obviously play only a small part in this market now even though it was talked about as one of the reasons for a higher call this morning. Dryness in western Argentina has been easing as they have recently saw rains as they were expected to receive. On Thursday through Saturday, the dry areas saw thunderstorms with some of them being intense. That has been of greater concern lately as focus will quickly shift to South America now. Even in that region the bullish fundamentals are fading. All of this helps to suggest the down trend line will hold. Recent rains will do little to help those finishing beans but it is just too small of an area to offset the good weather seen elsewhere and harvest progress that is already completed. Sales above 1000 have treated us well and we will continue to look at that level to sell. With the trending market lower, this 1000 level will continue to be harder to get to.

Wheat: You can not argue the trend in this market is higher. There is still no fundamental news to back it up but there is no reason to fight the trend of the market. There is obviously no doubt wheat wants to move higher. Once again it was likely supported by the falling dollar today as well as the grains moving lower. Once again this makes wheat nearly impossible to trade by just looking at wheat. In order to have an idea here we would first look at outside markets, then technicals and then in a distant third we would use fundamentals. For this reason we just don’t want to be anywhere other than spreads. Keep in mind the falling dollar – the rising wheat exports argument sounds good but does not hold water at all. Look at the wheat export sales chart on the Special Reports section of our website, www.allendale-inc.com, for more information.

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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