Corn: It was another day of grinding lower much as we have been looking for. As we have stated in the past, without the fund buying the market direction is very simple. Without that kind of large buy support this market will set back. This was seen a few weeks ago when the funds took Thursday and Friday off the market set back. That left us asking what if the funds take weeks off. Why would we expect anything other than a lower drifting market? Funds key off of the dollar which has been on a good size bounce. For over 2 months the general downtrend of the dollar and economy has caused fund investment in all commodities and for the first time the dollar chart actually shows slightly bullish signs. This has not caused trading fund liquidation but has kept all large buyers quiet in this market. There is always the chance for the upcoming storm to provide some support as well. It was hardly mentioned this morning but may catch more attention tomorrow especially if it hits in IL which is still far behind pace (85% complete). As long as the economy shows signs of recovery we can expect the general grinding lower of corn to continue. Should we hit fund stops, this grinding lower will turn into a faster paced liquidation. Keep a close eye on the economy. Two months of buying are based on a poor outlook and it should be more than evident what we will see should signs start to turn around.
Soybeans: Anticipation of continued China buying is keeping this market well supported. Good demand has lowered the average estimates of bean carryout down to 235 mil bushel now. For once it appears that this market is supported by solid fundamentals instead of just strictly fund buying. However, much like the fund buying we are fully aware that China can stop their buying without notice. As we saw in corn just a couple weeks ago, beans are at their high prices for the year. This has to be seen as an opportune time for putting on next year hedges. Corn has already set back enough that many people are saying they had wished they had an hedge on earlier. This market is one that is giving us the opportunity right now to take the same advantage and we should not miss it. An order for a $10 floor with a $12 ceiling (buying the $10 put, selling the $12 call and selling the $8 put) traded right around our target of EVEN money today. Let’s be sure not to miss what the beans are giving us right now and put some hedges on at profitable levels. There may very well be a spring rally but right now we are handed levels we can have a very good start and should be taking advantage of it.
Wheat: Why is this market still at these high levels? There is no reason for it and it is most set up for the setback we have been seeing. We have been talking about being bearish wheat as well as it being the market most affected by fund influence. Any talk in the economy recovering is likely to have the largest effect here in wheat. That was seen today with yet another round of selling. This chart is starting to look exactly like corn. Both have little fundamentals supporting these markets. There has been talk of this market being more deserving of trading 450 than 550 which could come true quickly on more positive economic news.
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