Corn: New contract lows in December corn were seen Monday on a few factors. We really could not have written a more bearish weather report than what we saw, both in the morning and at noon. While we feel that this recent selling has been too quick, it is important to know that July 9 will see a revision of the corn yield.
The largest gain from June to July in the past has been four bushels per acre. If yield is increased the expected three to four bushels, along with our 909,000 acre increase in expected acres for Wednesday, we could soon be looking at a near 1.8 million bushel carryout again. That is the same number this market was looking at the last time we had December lows down to this point. If you figure the market is really looking ahead that far then fine, we can justify the current price levels. Add in the bearish weather mentioned earlier, and then you still have a chance to drift lower yet.
Let’s look at the potential bullish factors now. When it comes to funds, we will notice that the dollar bounced today on euro weakness, which does not help our case there. China could come back in at these low levels again to add market support. Let’s not forget to mention that more general demand can show up at these levels as well. Last week, we had nearly a 1.5 million tonne export number with little coming from China. Who would be surprised to find general buying of corn at these levels? After all, these are fresh lows that end users have not seen in years. These are the main areas that could add quick support, but there is one that is often forgotten and that is the quarterly stocks report.
If there is anything that could come in with blind side support it would be that portion of the numbers we will see on Wednesday. In that report there is the sometimes mysterious feed and residual use which has added surprise support in the past. Between that number and a potential increase in export expectations, we don’t want to write off another bounce in this market to sell from. If this bounce does occur on Wednesday it could provide that opportunity
We want to stress the need to have open working orders to sell before the opening of trade Wednesday. If we get these bullish numbers followed by a continued bearish report, then we may not have a sellable bounce last long. We want to remain on the sell side for now. There is a good amount of talk about the potential turn in weather late July/early August but we will trade that if and when it approaches. Right now we would rather be sellers of bounces and will look at weather problems when they arise. There is no doubt that if there is to be a sizeable and long lasting bounce in this market, it will likely come from a change in weather. Let’s just not bet on that change yet…Ryan Ettner
Soybeans: It was a wild day in soybeans on Monday with a 16 cent range in November beans that occurred in the last 15 minutes of trade. Apparently, a major spreader came into the market selling July and buying November. Rumors that someone got the USDA’s stocks numbers (bearish) and another rumor the Chinese settled their Argentine bean oil dispute was bearish the spread. But then rumors of China buying U.S. beans caused a sharp recovery (led by November).
Whatever the case, we were not able to confirm either report and with the gulf 4-5 cents weaker today, we doubt new sales were made. Cash bean oil traders in Argentina said that all transactions remain blocked so despite statements about a settlement, the market does not see it.
Monday's crop progress shows 97% planted, normal for this week, and conditions fell 2% to 67% good to excellent. These reports are considered neutral.
Wednesday is quarterly stocks and acreage update. Then next week we get USDA’s yield estimate. We expect acreage will decline on beans but the industry as a whole expected acreage will increase. Stocks could also be a big surprise as most traders feel that the USDA will show a very tight situation. However, a recent drop in export and an announcement to shut down nearly 50% of the crush industry should cause the United States to get through the balance of this tight inventory year. Reminding us of how this will change so dramatically is the USDA WASDE supply demand report on the 10th. We expect USDA to show a 74% increase in new crop stocks.
Direction: We expect November to hold 900. As long as that holds, then we expect a move towards 960 in the November. Long term, we view ANY price over 950 as a fundamental selling opportunity, but we will monitor the charts and provide recommendations accordingly. Producers are 75% to 100% hedged and have recently reviewed all positions for a summer seasonal move…Bill Biedermann
Wheat: Weekly inspections at slightly more than 16 million bushels were regarded as bullish vs pre-report estimates. Egypt bought exclusive Russian wheat. Not just wheat but include the corn and rice (all starches) traded lower for much of Monday. Most likely, you can anticipate a higher trade for Tuesday but rallies are expected to be sold, with a better than last year condition rating for corn and rice and an active winter wheat harvest taking place.
Domestically and globally, we are drowning in an abundance of wheat stocks. See our Allendale Inc Advanced Charts for key support and resistance levels. Normally winter wheat farmers can find their best flat cash wheat prices in Oct and Dec. The question now is could this be moved ahead by one month given the pollination for corn? Talk within the HRW winter wheat harvest is good test weight and yields but also good protein levels, all bearish to the futures market, a dream come true for the end user. The Sept vs Dec SRWW remains in a tradable range of 26 to 31.5 carry market. The winter wheat harvest progress report did not hold any surprises at 38% harvested vs 33% last week and 39% five-year average…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.