Corn: Starting off, the week found corn setting back from some big gains made last week. Friday may have seen longs taking profits, but those traders were required to wait another day after watching the dollar drop. That means Monday was the first real opportunity for profit takers.
On first look at the sell off, it appeared to be sizeable but when looking at a longer-term chart, very little damage was done to the recent uptrend. To actually damage the recent uptrend, March corn would have had to set back below 558 when instead it settled at 568.
Helping to keep a bullish outlook on the corn market is strength seen in crude. At the moment, the dollar influence is minimal as it is trading within a recent range. Fear will move into the commodity markets only if the dollar starts making new recent highs, which would require a 150-point recovery. That means that for outside influence we need to focus on crude for the short term.
We don't expect the USDA to change the production side of the balance sheet on Friday. A look through history all the way back to 1994 never saw USDA change production numbers on the December report. We look for carryout to be left unchanged at 827 million bushels. This means corn looks to be neutral on Friday and if it is to move higher, more influence may come from the beans where the report looks to have larger impact. Funds are calm, outside markets are supplying support and smaller traders are likely to stay calm until seeing what Friday holds in store for this market…Ryan Ettner
Soybeans: Forecasts have given Argentina two chances for rain in the current forecast. The trade is wondering if this is the start of a new pattern, from dry to normal, or whether it is a temporary reprieve from La Nina conditions. Argentina is the world’s third largest soybean producer. It is typically the third largest soybean exporter and the largest exporter of soymeal and soyoil. News out of Brazil is also bearish. Analysis firm Celeres estimates Brazil planting is 91% complete. During Monday, two separate firms lowered their estimates of Brazil production. Celeres dropped its estimate from 69.1 to 68.1 million tonnes while Agroconsult lowered from 69.6 to 68.4 mt. That sounds bullish; however, both of those new numbers are still higher than USDA’s November 67.5. It is also above the USDA ag attaché to Brazil. He is at 66.8.
Wheat: Wheat closed sharply higher for a fourth day in a row on Monday. The close at 793 was the second highest close ever on the March contract. The highest settlement for the March contract happened on Aug. 5 at 818. The bullish spike higher move has been fueled by several factors.
Friday’s CFTC report showed the funds short 22,802 futures and options positions combined. This report was taken based on the close Tuesday of last week. The market has risen 108-1/4 since then. We believe that this week's report will show that this short position has been cut and it may even show them long.
Weather problems around the world continue to feed the bull run. The trade is concerned about the continued dry weather that is hampering the hard wheat areas of Eastern Colorado and Western Kansas. The U.S. is the largest wheat exporter in the world.
Rain continues to fall in Australia as it continues to fight to get their wheat harvested. Forecasters have them getting 1- 4 inches more of rain through Thursday. Some estimates say 90% of the crop may only be good for feed due to the damage being done. Australia is the fourth largest wheat exporter.
The wheat crop in China is also experiencing weather problems. Reports out of China say 17% of its crop is suffering from weather issues. China is the largest wheat producer…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.