Corn: On Monday, corn was really put to the test. March corn threatened to take out the five-month uptrend line that the entire rally was based on. That crossed in March at 523. First thing in the morning, corn made an attempt at that trendline thanks again to the dollar on a bounce. It is possible that higher bean and wheat trade may have helped keep larger selling from occurring.
Obviously, breaking this long standing trendline is the next area that large fund selling would be expecting. We can use wheat as a guide when looking at what to expect for corn. Funds were heavy buyers of the wheat market up until it took out the long term trendline. After that, we have seen some fund trading of the wheat but obviously much less than what they had done before hand. In fact, since that trendline was taken out in wheat after a three dollar rally, the market has been in a one dollar sideways range. If you look at the same thing happening in corn, it would mean a 50 cent trading range.
Breaking the trendline could mean the final liquidation by funds and the resumption of following fundamentals rather than the dollar. One problem with breaking that line is the quick liquidation that is likely to follow. For now, corn will remain a buy at the uptrend line but if it should be taken out there holds a strong possibility of active selling before prices finally level off. Corn bulls have to have this line held.
Soybeans: Though China did raise the reserve requirement for banks, it did not raise the closely followed interest rate level on Friday. With that good news and concern over dry forecasters for Argentina, prices moved higher.
Thanksgiving Week: Dan Darst, here in the headquarters, asked us about the Thanksgiving week effect on prices. Seven of the past 10 years have seen stronger pricing for January soybeans. If we follow the average of the higher years, we have 1228 1/2 as a Friday expiration.
Wheat: Weather was the main support for the wheat market on Monday. The trade was looking for the poor weather last week to show up in a 1 to 2 point drop in condition ratings. Wheat ratings actually came in with a 1 point increase at 47% good to excellent. These are the lowest ratings for this week of the year since 2008’s 44%. With the wheat moving into dormancy soon, this week or next may be the last updates until spring.
The soft red wheat has received some good rains recently. How much it will help the crop is debatable as we are on the cusp of dormancy. It will help rebuild subsoil moisture but much more is needed before spring. The far western hard wheat areas continue to miss the rains and that is hurting their yield potential. We look to more choppy sideways trade as we move through the shortened Thanksgiving Holiday trade week and have December option expiration on Friday…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.