Corn: Futures closed 3-4 lower Monday following the crop tour’s projected yield of 164.1 bushels per acre (bpa), which exceeded most traders’ expectations of 159-162. Even though it was below the U.S. Department of Agriculture's latest 165 bpa estimate, it would still produce an ample crop.
Allendale’s farm survey is the next big number to come out. We hope that all producers reading this have either filled out a form online or called one of our professionals to complete a survey. The number one issue in this market is the yield debate. A 2-3 bushel swing in yield is the difference between adequate to tight supplies.
Aside from the big yield debate is extremely large demand. Sales were announced today to Japan and unknown destinations. Weekly export inspections were strong at 31 million bushels. However, new crop harvest is getting started, and cash markets are starting to reflect this. Many cash markets were 1-3 cents lower than futures on Monday, while deferred delivery was actually up 1 cent in many locations. This means that the cash market is expecting a large crop and does not want all of it delivered to the market at once. They are willing to pay the farmer more money to store it for later delivery.
Crop conditions were expected to drop 1-2 percent and they actually came in at 70% versus 69% last week. Corn rose by 1%, while soybeans fell by 2%...Bill Biedermann
Soybeans: In a market that was traded a little more on the calm side Monday there were some important developments. First of all, near daily sales of beans continued with another 213,000 tonnes sold. Of that number, 108,000 tonnes went to Mexico and 105,000 went to “unknown” which, of course, is likely China. More daily sales will likely make for another impressive total when Thursday comes around.
These daily sales are continuing to help this market out that is otherwise beginning a new downward trend. To start the day the beans found just enough selling to put in lower lows than what we saw Saturday. That means even with a settlement in the green, a downtrend is continuing. A psychological support level of 1000 was held Friday, only to be quickly taken out on Monday. All we can really find are light support levels until 960.
For that reason, an option trade of buying a 970 put and selling a 1060 call for near even money still looks to be a quite worthwhile trade. Let’s say that with harvest approaching you want to have some coverage but don’t want a position that needs to be watched every day. In that case, you can look to buying a put outright. If looking for a move to 960, then just buy that put. At a cost of around 16 cents, Monday we are looking at an $800 investment for a trade that will never ask for more margins while we are all out busy harvesting. Simply listening to quotes on the radio will be enough for this trade if you are busy until our 960 initial objective is reached.
This is a market that is in a downtrend and was even given impressive yield numbers from the commonly bullish Pro Farmer. Their yield number of 44.9 bu/acre is supplying fuel to a bearish fire. That also means we need to get our own estimates in this week during our own crop survey. We are still taking in yield estimates through this week, and the more numbers we can get the better. Be sure to call in so we can have the most accurate results possible and you will see the results first…Ryan Ettner
Wheat: Renewed talk on the Russian situation supported futures prices on Monday. One official suggested the crop was near 50% harvested and that production would be down around 38% from last year. There is still speculation they may need to import quantities of wheat later on this year. Traders are also looking for further signs that the United States will pick up a few extra sales in the coming months to fill the hole from FSU countries. Though short-term news items are supportive, we cannot suggest this moderate rebound will retake the highs. We are bearish…Rich Nelson
Bill Biedermann is Sr. Vice President at Allendale. Ryan Ettner is a registered commodities broker and grains analyst at Allendale, Inc. Rich Nelson is Director of Research at Allendale. Allendale is registered with the CFTC and NFA and is a member of the NIBA. www.allendale-inc.com.