Corn: Monday would have been the third day of trying to remain supported on Chinese rumors and that would have been pushing it. Previously, this market was only holding gains for one day on rumor talk so to expect three days was unlikely.
It is not to say that we can’t find other factors for support with the large rains in the southeast United States being one of them. Our problem with keeping the market supported is that this market has moved a long way to the high side on simply rumors, so even with support from the flooding rains this market was still destined lower. A more accurate way to look at the slide today might be that without the heavy rains, this market would have slid even further.
Over the past couple of weeks China has come out with real market moving news on a Wednesday. Add into the mix trade was looking for a 70% planting pace number in the afternoon which did nothing to help the corn bulls. Monday also saw a significant bounce in the dollar, which added a slight bearish tone to the market.
Corn bulls do have potential fuel to add to the fire. China could come in with more corn purchases, funds are still barely long this corn market allowing for potential speculative buying and down the road the government may increase the ethanol blend. For those reasons and more there is potential reason to rally but they are just that, potential. Hedgers should take full advantage of what the market gives if this second purchase of corn by China is confirmed.
What some people have mentioned to us that we do not want to hold out for is drought. Right now going out to the 16 day forecast, there is no call for long term dry weather and betting on a drought obviously fails much more often than it helps. It would just be easier to hedge too early and get out rather than count on a drought. Corn hedgers need to take advantage of more China sales and corn buyers should look to secure more needs on test of old support of 375 1/4 December or 355 July…Ryan Ettner
Soybeans: It was Thursday that we last saw China purchasing new crop soybeans. Judging by some of the sentiment out there, that seems like weeks away. Instead the trade is turning its attention to USDA’s first update on planting progress for soybeans. The trade is expecting USDA to show that planting, as of Sunday night, will be 13% complete. That would be the second fastest pace yet for that date. The five year average pace will be 8% complete. Judging by the weather forecast, there will be off and on moisture coming and no significant weather threats. We are hearing of some concern about this weekend’s cooler temps but do not have many forecasters suggesting a solid frost will be seen. That is more of a corn issue right now due to emergence rather than a soybean issue though…Rich Nelson
Wheat: The Kansas winter wheat tour is underway with the perception of a high yielding crop with some rust. Final tour estimates are scheduled for release this coming Thursday with USDA providing its estimates on the 11th. The talk within the fundamentals continues to focus on large ending stocks for the 2010-11 marketing year, good soil and crop conditions on smaller acres. This great crop is holding its own as it should be given present soil conditions. It is estimated funds sold an estimated 2,000 contracts of wheat despite bullish weekly wheat inspections. We favor July wheat vs the July corn as a spread trade, support is 107 with resistance at 144…Joe Victor
Rich Nelson is Director of Research at Allendale. Ryan Ettner is a registered commodities broker and grains analyst at Allendale, Inc. Joe Victor is Vice President at Allendale. Allendale is registered with the CFTC and NFA and is a member of the NIBA. www.allendale-inc.com.
