Corn: With a chart gap left to fill in the December contract, there was good reason to look for a bounce Tuesday. Technical traders will at least want to accomplish a move to 620 to fill that gap but support after that will have to come from a different source.
There are three potential areas that are most likely to provide this support. First and easiest would be new fund investment to start the quarter. Unfortunately, we have already traded two days into the new quarter without seeing anything sizeable from them. Second, a weather threat could unfold during pollination. Right now there are no major threats in the forecast but with the late start to the crop year, this corn should be in key pollination stage during the hottest time of the year. We will need to watch forecasts for any heat in late July for this. Last, there are more rumors that China is coming back for more corn purchases. Obviously, no one knows for sure if we will see more buying from them but we will watch each 8 AM announcement period for new sales to “unknown.” Rumors being talked about Tuesday were hinting to China buying an additional 3 – 4 million tonnes.
Right now we must focus on the numbers given to us from last week first and foremost with these potential bullish factors as just that, potential. Tuesday showed relatively light volume buying in an attempt to fill the chart gap up to 620 1/2. It is still too early to get excited about this recent bounce unless it can manage a move convincingly higher than 620 in December…Ryan Ettner
Soybeans: Beans closed higher for the second consecutive time, led by corn and wheat. Early gains were limited from disappointing weekly export shipment data. USDA reported export inspections of US soybeans last week at 4.515 million bushels. That was below estimates of 7-11 million bushels.
Warmer temps and good soil moisture this week could be good for crop ratings and bearish for prices. USDA improved the good to excellent rating by 1% to 66%. We are looking for a potential setback tomorrow to the 1300 area and possibly retest the lower end of the range at last week’s lows of 1286. We are short from 1310 and will look at taking profits on a deeper break.
Funds were buyers Tuesday for the second straight session buying 3,000 contracts. We have not seen large buying, which tells us we can expect to see more down side when they decide to get out. Beans are still a follower right now. If corn goes up, beans go up and if wheat goes up, beans go up. This is still the mentality we need to have until we see more of a weather market as we move into August. Right now, the heat and rain have helped this crop. We still planted late and could see a bigger weather rally in the short future. Keep an eye on the long-range maps…Steve Georgy
Next page: Wheat looks strongest...
Wheat: The bargain hunters were out in force Tuesday. This and general commodity buying gave the wheat pit one of its best days in a long time. For the day, Chicago December wheat closed 20 3/4 higher, while the December Kansas City contract was 14 3/4 higher, and the Minneapolis December contract was up 26 3/4.
After the Chicago December wheat contract plummeted $2.24 last month, it was oversold and due for a technical correction higher. Wheat also continues to trade at a discount to corn and that has allowed it to be used as a cheaper feed ingredient compared to corn. This has increase domestic demand for wheat and should be viewed supportive for the wheat
Even after Tuesday's move higher, wheat is still at the low end of its economic value. Allendale Inc. puts the current economic value between $6.20 and $7.20 basis the September contract. With the price being at the low end of economic value we would look for dips to be supported by end-users. We would caution getting too bullish at these lower price levels as rallies may be capped near term as the winter wheat harvest continues to move north over then next few weeks. As of Sunday 56% of the crop has been harvested…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. Rich Nelson is Director of Research at Allendale, Inc. Allendale is registered with the CFTC and NFA and is a member of the NIBA. www.allendale-inc.com.
