Corn: As news goes, corn didn’t have much on Monday. Most trading that occurred was based off of influence from other markets. For most of the day, the dollar was trading over a dollar lower with crude near $2.00 per barrel higher. While on this topic, it should be noted that funds are estimated to be long just 50,000, which would mean that the dollar should have only minimal influence on corn now. Crude will now have much more influence until the funds become interested in corn again.
China purchased two cargoes of corn overnight. Beans and wheat had bullish news to trade so the corn followed along. One of the factors that make us believe corn is still holding strong is how it performed while the beans sold back at the end of the day. Beans dropped almost 10 cents from their highs going into the close while corn actually bought slightly settling right in with some of its best trade in the day session.
This market looks to be one major China corn purchase or poor weather forecast away from getting us to our next hedge targets. Those targets would start around 385 as we look for producers to pick up selling at lower levels than we saw last time just because of the dismal prices we came back from. For now there is little argument that weather remains the most bearish influence. Areas in the western Midwest are seeing too much rain which could be the start of a concern there but otherwise conditions remain nearly ideal. As a whole, only a few producers have bad things to say about how their corn looks. That means this week will need to see more good demand news.
We need to build in some type of premium to absorb a possible increase in corn acres at the end of the month. There was one estimate put out recently calling for an actual drop in acres but we find that hard to believe with the great planting conditions we saw this spring. If we see both a small increase in acreage as well as yield, we will be thankful for building in premium before the end of the month. Should we find news to spark the market higher once again, we will look to be sellers and that is where our focus is first in corn…Ryan Ettner
Soybeans: Canada’s announcement that they would lose 12.5 million acres of spring wheat, Durum, and Barley production caused sharp rallies in all grains on Monday. Oats were limit up while Canola was only .50 higher. Traders basically picked up today from Friday’s wild close when everything rallied the last few minutes. Some traders expect the funds that are now short to reverse and get long based on strong cash markets and news that China is buying US soybean oil.
USDA announced 80,000 bean oil recently sold (40,000 of that Friday) and we believe the actual number is near to 110,000 tones. USDA said weekly inspections for bean exports were 7.3 million bushels (mb) which was below the 10.1 mb we need to meet USDA’s demand forecast. This trimmed enthusiasm a little along with disappointing Crush Demand released by NOPA at 127.8 mb versus 132 expected.
Despite the disappointment, funds bought 4,000 beans and with the paper demand across the board, this caused beans to close 5 higher for the day but about 7 1/4 cents off the high. Monday's high was within 2 cents from hitting a moving average resistance while support is from 936 to 925. After the close, USDA announced planting advanced last week by 7% to 91% complete v 90% normal for this time. Crop conditions fell 2% at 73% v 75 last week and 66% good to excellent last year…Bill Biedermann
Wheat: Canada continues to capture the majority of the grain headlines as the Canadian Wheat Board now suggests 10-12 million acres of its crop acres may go unplanted not the 1 million acres which aired in an earlier newswire poll. What is at risk? Oats, barley, wheat and canola as well as other crops within Canada are affected. Across the border new crop plantings such as durum, spring wheat, soybeans and oats will have price impacts. Just before the close in the side-by-side session, there were 1,931 oats contracts in the oat “pool” with synthetic options suggesting oat futures to trade 19 cents higher on Tuesday. A close above 450 is positive but we see winter wheat on the sell side with Minneapolis wheat on the buy side of the spread trades, call us for support and resistance levels. Allendale recommends the use of options before futures…Joe Victor
Bill Biedermann is Sr. Vice President 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.