Corn: Monday was day three with no major speculative buying interest in the corn market. That will continue to mean that normal cash selling will grind this market lower until larger support is found once again. Another factor that can be expected is that buyers will come into the market on any move that breaks previous low. So we look for good support buying to come in. The question is if we see the large spec buying to continue the rally to 600 and beyond. Outside markets once again suggested heavy support as the dollar did last Thursday without any fund buying. Larger spec buying was seen in other markets, just not the corn today.
With a forecast that continues to support a fast harvest, this market will stay on the defensive. Some are talking about buying calls out into March in this market. We would not disagree with that but consider a call spread. If a 750 call can be sold for just over 10 cents, then why pay full price for a 600 call? Buy the 600, sell the 750. If this market just keeps moving past 750, we would have to place new coverage but if the market otherwise turns lower, we save on a drop.
Being day three of little or no spec activity is starting to catch attention. Hedgers of next year’s crop can wait for a drop to 500 corn for next year before placing orders. That would give adequate time to see if the rally continues first while still seeing $5 corn for next year, which is certainly not a level to laugh at…Ryan Ettner
Soybeans: The trade is still favoring soybeans. Where fund sales in corn and wheat were 10,000 and 5,000 contracts, respectively, soybeans only saw light sales of 1,000. In addition, the morning weekly export inspections report showed good shipments of 59 million bushels last week. Lastly, China continued its buying spree today with two cargoes of U.S. product purchased. On the harvest end, the trade was looking for last week’s 67% pace to move up to 80% this afternoon. USDA gave us an 83% result…Rich Nelson
Wheat: Rain in the forecast and lack of fund-buying put pressure on the market today. The rain has not fallen yet, but the forecast is changing for the wetter by this weekend and next week. Our forecaster is calling is for a large portion on the region to receive “some” beneficial rainfall during the next few weeks, which will help ease the dry biased soil conditions. Soil moisture deficits from normal are likely to prevail, though. The market would like some rain to get the newly seeded crop germinated and get a good stand before winter sets in.
World weather wise, Western Australia will receive some rain this week but looks like it may be too little too late for the crop, which is in the early phase of harvest. Traders are already lowering Australian crop estimates due to their drought in this region. Eastern Australia is receiving too much rain and that may affect quality of their wheat.
Ukraine’s government has adopted a resolution to impose a 2.7 combined export quota for corn, wheat and barley for this year. The quotas cover 2 million tonnes of corn, 500,000 tones for the wheat and 200,000 for the barley. The Ukraine consumes about 26 million tonnes of grain per season. Their government officials are worried that after their short crop this season, due to drought, that would be exported out of the country. This would drive prices high domestically and this would not be good politically. The Ukraine has exported about 4 million tonnes of grain so far this season…Jim McCormick
Ryan Ettner is a registered commodities broker and grains analyst at Allendale, Inc. Rich Nelson is Director of Research at Allendale. Jim McCormick is a Sr. Broker at Allendale, Inc. Allendale is registered with the CFTC and NFA and is a member of the NIBA. www.allendale-inc.com.