Corn: Massive fund liquidation last week and a near 60 cent slide in prices since the USDA report has pushed the market into an oversold condition. The commitment of traders report confirmed that funds have liquidated nearly 60k contracts (trading funds liquidated 100k contracts while the index funds were buying 40k on rebalancing). Most traders saw the flat to weaker dollar today and the higher crude market and decided to get a jump on turn-a-round Tuesday and started buying corn expecting a bounce tomorrow. Funds are however not done liquidating. Trading funds are estimated to be long 121k contracts and they sold another 5k today. Export inspections, out at 10 am, were 20 million bushels. That was well below last weeks 31 million and the 30 from last year. A few local cash markets are pushing bids to get some good quality grain but for the most part, there is no shortage of inventory and there is plenty of poor quality corn moving. Based on the amount of corn that we expect to move before it warms up, we do not think there will be any pipeline shortage until summer. Thus rallies will not be sustainable…Bill Biedermann
Soybeans: Three good rounds of selling hit the bean pit today. There were two good rounds right after the opening with a third that came in around 12:30. After each selling round there was a small comeback which we saw going into the close as well. This is not to say this market wants to come back as there is just nothing to get too bullish about right now. Trading funds have been selling aggressively the last couple weeks (45,000 contracts) and they are still long over 40,000 contracts. There is no reason these guys cannot only get flat but also go short in this market. Weather in South America looks a little better with the morning forecast. Originally, the forecast called for only light showers this weekend, bringing relief after a week of dry weather. Now there are calls for heavier showers of up to a half inch. Following those rains, another system is expected to move in next weekend, carrying with it a higher chance for heavier rainfall. With our large crop from the last report, expected increase in bean acres and the large potential harvest in South America, it is hard to get bullish in this market. We can look for a bounce given that the beans are technically oversold. That bounce is likely to be sold quickly, so we will need to keep our expectations within reason. With many people having the same idea to sell a bounce, it is likely to be small…Ryan Ettner
Wheat: Fundamentals remain bearish for old crop wheat, both domestically and globally. The US export picture is dismal. The percentage of our production that is exported is down to a level of 37.2% vs the typical 48.5%. The Black Sea region continues to dominate the market share of world wheat exports due the plethora of cheap freight rates. The US simply can not compete in the export arena. When Allendale Inc turns to domestic use, it is not good, demand remains soft for various reasons. Central Midwest old crop basis is -$1.22 under March while new crop is -$.55 under July futures. The winter wheat producer has spoken in the form of reduced acres agronomically and economically for new crop. Support from lower supplies will not be felt throughout the winter. Technically, continue to sell corrections for futures. We will closely monitor spread trades for support and resistance between wheat and corn…Joe Victor
Bill Biedermann is Senior Vice President at Allendale, Inc. Ryan Ettner is a registered broker and grain analyst at Allendale, Inc. Joe Victor is VP of Marketing at Allendale, Inc. Allendale is registered with the CFTC and NFA and is a member of the NIBA. www.allendale-inc.com
