Weekly fundamental grain report for Dec. 1

Corn: Not much was expected from corn this morning after the rally seen on Friday. There were not many who were expecting funds to back up that buying with more this morning. For most of the day, that is what we saw. Normally without fund support we have been seeing a moderate setback from the market drifting lower. Today, however, the market stayed well supported. All eyes are focused on whether the EPA will approve of the max blending rate for ethanol to be raised as much as 15%. That news is supposed to be released tomorrow. Many feel that the EPA will simply suggest they need more time before making a decision. It is the chance of giving an approval to the increased blend rate that kept the market supported today. Late in the session more active buying came in running corn just short of resistance. This buying was active but had more of a trading fund feel to it than the index fund buying we have seen the last few weeks. Buying that came in, was sudden and quickly set back, just about to even on the day within 15 minutes. News from ethanol other than the blending rate has been positive so far. Price for ethanol has increased which should keep good support in the corn market fundamentally as well as the production being up 13%. Weather looks to hold up for harvest progress. With precip holding off for a week, combines will continue to move at the pace of drying. Colder temps are expected late this week which will also be beneficial as combines will get the chance to drive where they can’t go right now from standing water and mud. For these reasons expectations are high that corn harvest should make good progress during the next two weeks. There is early talk of heavier snows coming in the middle of next week but confidence in that forecast remains low. We will have to keep a close eye on the EPA to see if they will give more fuel for this bullish fire. As it comes to hedging of next year’s crop it should be noted that December 2010 corn did not participate in the rally seen in other months today, leaving hedges harder to come by than current months might suggest. We continue to suggest producers take part in current prices at least in some scale.

Soybeans: On Friday there was only thin volume trade in beans, so there was not the same buying as seen in corn. That left the bean market to play catch up this morning. Even with the corn called to start the day steady, there was a good size rally which beans needed to catch up to. Fundamentally supply is looking good as South America still looks to have a good weather setup. Estimates for their production continue to rise. On the demand side both crush and exports are ahead of the USDA expected pace. Going over to the technical side the Jan beans had a major level of resistance that many were watching out for. That level was 1068 and on a bounce that is exactly where beans stopped. That left thoughts of just how high could the beans go if we were to break that level. Shortly after that, 1068 was taken out with very little additional buying to keep beans running higher. Without that support, the beans gave back a good amount of earlier gains and suddenly didn’t like quite so bullish. There is no doubt that an uptrend is still in place but large buying on breaking resistance did not surface. Without that buying it now looks that if beans are to head higher from here it could happen much slower than the bulls could have hoped for. As with the corn, the deferred months of beans such as November 10 did not take part in the rally nearly to the extent of front month contracts. November 10 barely managed to trade at 1055 and even ended up closing lower on the day. That contract continues to move to new high territory making additional rallies unable to translate to gains in the deferred months. This means that those looking for $12 beans are not likely to find them anytime soon for next November.

Wheat: With the choppy trade seen in wheat lately, it should come as no surprise that this market was once again the leader to the upside. March wheat is approaching its recent resistance of 604 3/4 and only those willing to take on a high amount of risk should sell at that level. Options or spreads are still the way to go for this market. There was some small talk this morning of concern that winter wheat acres will not be as high as expected. This likely will not come as much of a surprise to most and probably reflects only a couple cents out of the 15 higher move seen in this market today. If you want to sell this market then the 6 dollar level has been good resistance but again, we would recommend options.

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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