Trade expecting lower yields, higher prices for corn

Corn: Fund buying continued Monday while talk of lower yields continues. Most traders are convinced that yields will end up at 158 bushels per acre. A major bank suggested prices will hit $6.00 in December corn if 158.5 yields are confirmed. We would agree for the most part…our models say that a 158 yield would suggest a move to at least $5.60. However, at this time, we would have to disagree with the general public regarding yields. Maybe we just have the best farmers in the country working with us, but we are finding that most yields are in line with expectations and the number we surveyed. Therefore, we would have to think that the U.S. yield will end up very close to our surveyed 162.3 yield or 162.5 USDA’s report. Based on a 162 yield, a high in the $4.85 area is projected (already achieved)…Bill Biedermann

Soybeans: In the overnight market, traders were once again anticipating buying by running the beans slightly higher. Expectations were likely counting on fund buying on Monday to reward those early buy orders that are hard to argue with. Recent yield reports that producers have shared with us have been very strong. Some early talk coming from non-SDS bean fields are suggesting early yields near 65-70 bu. These same producers mentioned that they were expecting good yields for some time. Obviously, the bean bulls will ignore these reports until they hear yields from those fields hit with SDS. Just talking with some of these producers would get someone bearish. They are looking for their beans to help offset some of their disappointing corn yields.

It does look like the market started to show weakness as it has in the past by slowly fading throughout Monday even though corn and wheat continued strong. This market is unlikely to fall apart while the other grains continue to rally, but keep in mind that the mindset is already slightly bearish on early yields and a poor technical chart, so this market will fall quickly if something should happen to corn. We will keep eyes and ears open for more bean yield reports, especially those affected by sudden death syndrome (SDS). If the beans hit by SDS turn out to have at least decent yields, then the large scale outlook would look quite positive. With a strong close in corn, a final trade of only 3-3/4 higher shows that beans were simply strong along behind the strong corn and beans…Ryan Ettner

Wheat: Good rains in recent weeks have caused Argentina’s Agriculture Ministry to increase its wheat crop estimate from 7.5 million tonnes last year to 12 to 13 this year. Also, there's the news we reported Monday morning that the Australian Crop Forecasters have raised their estimate of Australia’s wheat crop. This is knocking down some concerns. The other negative story was word that Philippine grain importers canceled two cargoes of Black Sea wheat in favor or local corn. Even with this news, wheat prices closed higher today. See our charts of fund positions on the website to see what is driving recent price action…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.

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