Corn: With crude on a $3 rally at one point on Monday, combined with a lower dollar and bounce in wheat, corn found higher trade to come quite easily. Even though correlation has been low between the dollar and corn lately, that correlation has a high chance to come back in on a dollar move past support.
If the dollar market again threatens lows from November during Q2, we are now talking about a significant chance for fund buying. Put that together with a blazing ethanol production pace that far exceeds USDA expectations, and you have both technical and fundamental reasons to keep this bull market going.
Buyers on any upcoming pullbacks have a trendline of 634 to where they can risk long positions. With price outlooks still looking for 700 corn, buying on a turnaround Tuesday will appear attractive to speculators just as they have done countless times before. Added confidence will be given on a March move above 662.
At current, crude has run over $6.50 higher in the last two days. Now crude is also threatening to take out resistance just as the dollar looks to take out support. This makes watching outside markets essential for short-term corn direction in old crop months. Those looking to trade acreage battle discussions or potential planting weather would do best to stay in December and stick to futures trades…Ryan Ettner
Soybeans: Beans rallied along with the rest of commodities on Monday. With the falling dollar and the unrest in Egypt, the bean market should continue its trend and make new highs this week. We are currently long with a target near 1430.
The fundamentals in beans have shifted over the last few weeks. The scenario was that South America was dry and the crop was in trouble. We are now looking at rain hitting the crucial areas and potentially an improvement in crop conditions. The bullishness in the beans comes from the continued strikes, the major ports and the strength in corn and wheat.
Soybeans should continue to be pushed higher as wheat and corn make new highs. The technicals are pointing higher and the fundamentals are neutral. We are going to look at pullbacks as buying opportunities but look for a choppy market over the next few weeks…Steve Georgy
Wheat: The wheat bulls were back in charge Monday. The world buyers are scrambling to secure grain supplies. Fears that the civil unrest in Egypt might spread has vulnerable governments around the world trying to lock up food needs.
Last week Algeria purchased 800,000 tonnes of wheat alone. The UN’s Food and Agriculture Organization has stated its global food index has surpassed the all time highs made in 2008. The cereals index has risen 39 percent in the last year.
There are news reports that top US wheat importer Egypt, is facing unloading delays after operations at the countries ports were suspended due to the protest. Grain ships will be allowed to offload during daylight hours only and only if silo space is available. The question is once the silos are full, who will move the grain from the ports to the domestic users with all the violence going on in the country?
The trade is also keeping an eye on the weather maps. The soft red wheat belt looks to get some good moisture from the snow event that is going to hit the Midwest this week. The far western Hard Red wheat areas continue to miss out on the moisture. After the storm system moves in, it opens the door for bitter cold to dive in from Canada. Any wheat that does not have snow cover will be susceptible to winterkill damage…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.