Grains report for Feb. 9

Corn: Abundant buying surfaced today when a weaker dollar provided macro support and a rumor that Tuesday’s USDA Supply Demand report would be bullish provided micro support. Support also came from last weeks EPA decision that opens the door to more corn ethanol usage (we have thoroughly discussed last week)…Bill Biedermann

Soybeans: Good support came in today on the anticipation of tomorrow’s carryout report. The Trade estimates a carryout of 219 million bushels. That is a decent size reduction from the 245 estimated in January. Beans saw an early morning “knee jerk” reaction to talk around the grain floor that the carryout number could actually come in down near 190 mil bu. Tomorrow’s report will be a key for helping to determine short term price direction. If the trade is accurate with its prediction (219) there looks to be a chance for a short term bounce followed by a continued slide lower. A slight reduction of carryout may catch some attention for the short term bounce but the South American crop will likely pull on bean prices once again. If the floor is accurate (190) more support can be found that may actually help to stabilize the bean market despite the large potential upcoming harvest. We have chosen to take the sidelines until after seeing the report. It should not take long after the opening to see how the market will want to trade the carryout. If it is neutral to bearish, we will look to get short once again. If the number is bullish, we will then look to take either side of the market once again based on market reaction. This is the first time we have considered placing buy orders as more than just one day trades to catch a bounce. We have chosen to not fight the long standing trend lower which has benefited us well. With the large potential crop in South America yet to be harvested, we are hard pressed to be bullish unless tomorrow’s carryout number puts us in a position that we just can’t ignore. On a final note, it should be noted that there is a slight chance the report will be delayed due to the government being closed today dealing with the snow…Ryan Ettner

Wheat: As noted on Friday, it really does not matter what USDA tells us tomorrow for wheat ending stocks. The average guess is for a small revision from 976 million bushels at the end of the 09/10 marketing year (May 30, 2010) to 973 million bushels. From a research standpoint, anything above 700 million bushels is still drastically too much and should make no difference in price. However, from a trade psychology standpoint, one key here is “at least stocks are not increasing anymore”. Another issue with that is the fact that US farmers are doing something about these big stocks. Their plans to lower winter wheat plantings were exaggerated by harvest delays for a full 6 million acre reduction. Though our downside price projections have been met, we are not turning bullish yet. We must confirm a bottom is in place first. So far, there have not been any closes that have broken the downtrend. There are early signs, like last week’s stable close, but we cannot say it is time to change our tune…Rich Nelson

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