Corn: This market still has a few long term supportive things to chew on. We are wondering how low the U.S. Department of Agriculture (USDA) will reduce yields in the coming months. We have an upcoming EPA announcement on blend rates, and last week the trade heard new announcements of commodity investment plans. These stories lead us to expect $5 to be a good fundamental support point for this market…Rich Nelson
Soybeans: In a day that saw more aggressive selling for corn and wheat, beans held good support throughout Monday. There were more sellers seen than what we have seen for quite some time. Volume spiked to start the session with the beans under pressure. In the last couple weeks, a spike in volume has almost certainly meant a quick run higher. As we would expect, there are plenty of buyers for each break in this market with those buyers pushing through to finish the day on the plus side when other markets were a good amount in the red.
Aggressive selling came as a surprise on Monday, following not only Friday’s big move higher but the overnight buying as well. It will take even more large-scale selling to overwhelm the long list of buyers waiting for a pullback. A good number of producers are looking to next year’s prices, especially considering that yields seem to be getting even better with each report we hear.
The November 2011 contract did cross the $11 mark overnight, catching the attention of hedgers but we will continue to hold off for now, choosing to miss the top when this fund buying is over rather than to margin all the way up. Any hedges placed right now have to be done with the intention of being held long term so choosing a route with margins that can be handled is highly advisable. We remain long term bearish but the short term higher move is obvious…Ryan Ettner
Wheat: Monday there was a news story from a lesser known Russian official that indicated their country may look to lift its export ban on wheat by the end of the year. This would run counter to earlier announcements of no exports until next year’s harvest is complete. While this is bearish, we had better not be too quick to jump to the sell side solely based on this news. Russia is known for changing its mind on this issue almost daily.
Heavy selling in corn helped to push wheat lower as well. Comparing the close, corn did have a tougher day than wheat, though, which may show that trade may not entirely believe in the Russian news as of yet.
On Thursday’s annual small grains report, we look for the USDA to revise 2010 wheat production 21 million bushels higher from its most recent estimate. There is also reason to believe we will see a bearish number from the small grains report on the same day. We look for Sept. 1 wheat stocks, the end of the first quarter in the wheat marketing year, to be 2.482 billion bushels. That would be the largest Sept. 1 total since 1987.
News continues to pile up in this wheat market which is anything but bullish. Until technical support is broken we need to tread lightly but once December Chicago breaks 677 1/2, we need to watch out for a potential fast move lower…Ryan Ettner
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.
