Corn: Speculators were finally given the opportunity to trade the analysts’ expected carryout number on Monday without aggressive index selling to stand in the way. Bullish speculators have been in this market for the last couple days but were not as noticeable in the middle of the fund selling. Monday morning it appeared that the index selling was either light or nonexistent until the close.
Traders know they are looking at a possible carryout of 779 million bushels and were “bargain buying.” If analysts are correct and we do find that carryout, $7 March corn would be more than likely. There is no wonder why buyers are aggressive here in the low $6 range if they are looking for a move to $7. As mentioned last week, trade has been known to miss this carryout number drastically in the past.
A common question is: How could they miss the number by so much? One major factor is that Wednesday will give us the final production number from 2010. All previous numbers we have seen are only estimates compared to Wednesday’s number, which will be the one written in stone. Last year, the USDA increased the amount of production 230 million bushels on this report. It suddenly said that production was much higher than anyone had expected and that number was not debatable. That means a sudden change to last year’s production is one way the carryout could be off.
Now that trade has bought in anticipation of the lower carryout that will be the number trade needs to see. If the USDA gives a 779 carryout number, we can expect a grind higher like the one seen in December. Any number less than 779 will now be a disappointment to speculators. Downside protection is important as we all know markets fall much faster than they go up. This January report holds the highest potential of the year for large moves either higher or lower. Think about the appropriate trade for your operation tonight and place that order tomorrow…Ryan Ettner
Soybeans: Beans found strength today as the market continues to talk about Argentina’s weather. The forecasts are still absent of rain and look to stay that way into next week. It seems traders have shifted their focus from fund rebalancing to potential yield loss due to lack of rain. Rebalancing was still heavy at the close pulling the March contract 14 cents off the highs.
We still feel we could see strength as we move toward the USDA report on Wednesday. The trade is looking for ending stock to tighten up from December’s estimates. Weather will still be the main issue after this report but we usually see a significant price adjustment from the figures we could potentially see. We are in a long position right now but were unable to take profits because the objective was at the high today. We only consider ourselves filled if the market trades through our price. We are going to adjust our target price down due to the report this week…Steve Georgy
Wheat: The wheat sold off Monday on index rebalancing and profit taking and a little better forecast. It was the second day of index rebalancing and it looks like they sold 3,700 contracts. In export news, it was confirmed Egypt GASC purchased 175,000 tonnes of Australian, U.S. soft wheat.
Snow falling over the Midwest today was more than anticipated. This will bring moisture to the crop and help insulate it from the bitter cold that is coming at the end of the week. The trade will be watching the maps to see if any areas miss out on the snow making those acres susceptible to winter kill.
For the most part the trade is trying to position itself for Wednesday’s reports. Average guesses for the report are for U.S. ending stocks to be at 842 million bushels. Global stocks are projected to come in at 174.607 million tonnes. Quarterly stocks as of Dec. 1 are seen at 1.937 billion bushel. Winter wheat acreage is estimated to come in at 41.219 million…Jim McCormick
Ryan Ettner is a registered commodities broker and grains analyst at Allendale, Inc. Steve Georgy is a Sr. Broker/Manager at Allendale, Inc. 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.