Corn: A sharply higher open on Monday on carry over influence from the European wheat market, higher crude and equities. Government officials are also discussing inflation/deflation and how the picture could change given further economic “easing” if a “double dip” looks imminent this fall.
One trader said, “if any soybean trader holding 'short' positions was scared today, they bought it early.”
But gains did not seem to last as traders looked for crop conditions to hold steady or improve. Opening on the high and closing on the lows, taking 13-1/2 cents off the opening leaves traders in a quandary. Everyone seemed to turn bullish corn over the weekend, citing a shift in demand to corn rather than Russian wheat. But in reality, this is not the case.
On Monday, Russia sold 180,000 tonnes of wheat to Egypt $22/tonne cheaper than the US price. Obviously, Russia sees this rally as an opportunity and is taking advantage of it. Most traders are now committed to the bullish argument and will do whatever they have to in order to defend their position…Bill Biedermann
Soybeans: Sunday night, Paris milling wheat futures were up 36 cents, so of course our wheat followed along. There is no surprise to see beans following once again, especially with fund buying as active as it was on the opening.
Beans were not without their own news, though, now getting an updated bullish forecast for the Delta. On the noon forecast maps there was little relief on the horizon for that area. They see a small reprieve Wednesday through the weekend, but then dry out again with little relief. It can be argued that some areas may be too far advanced to be affected, but it will need to be watched. In the end, it will be the wheat market that has the largest effect on the beans. What this forecast may do is to reduce the size of the setback once speculative trade is finished buying.
During this run higher, we want to state the importance of either staying in hedges. If getting out is absolutely necessary, then this crop should be sold in the cash market. Given that the reason for this much of a rally is not backed up by local fundamental news, a sizeable correction is still expected. Worst case scenario would be to exit hedges and not replace those with cash sales while watching the market drop. There is nothing necessarily wrong with stepping aside but have working orders to get back in on a drop if not in the cash market. One way to do that would be to place sell stops below the current market price so to not sell unless the market starts heading lower again.
Even though recent weather forecasts have been on the bullish side, wheat has proven to remain in full control of beans for now. It is evident where the beans want to go without wheat support finishing only 5 cents higher even after wheat finished 30. Selling found near the close is this market showing us where it really wants to go. Will wheat be up another 30 cents overnight? There is nothing that should surprise us there, but most importantly have a plan ready and do not allow fast and volatile markets to move you off a pre-decided plan. Let the wheat market panic, we will not…Ryan Ettner
Wheat: It is estimated funds bought an additional 13,000 contracts of wheat for the first day of August. Add the estimate to the number of contract longs before we entered the side by side trade day of 66,300 contracts and you have estimated fund contract longs of 79,300.
How much higher can wheat go? Ask the index and hedge funds as this present situation is about money flow and not necessarily fundamental news about the drought in Russia, too wet in Canada, and as of today, too dry in Argentina and Western Australia.
Weekly inspections were viewed as bullish to wheat as well as last Thursday’s sales. Not pleasing to wheat was the weekend announcement of Russia selling wheat for August shipment to Egypt. Gulf rates continue to sink (not good for nearby basis) as long as futures head higher. Take advantage of new crop hedging, you will not be alone in the northern hemisphere.
Crop conditions for spring wheat came in at 82% good to excellent, down 1% from last week but 11% higher than last year…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