Corn: A lower volume and choppy trade were featured Monday. It appeared as though some who had bought last week decided to take profits just ahead of the report while there was still plenty of support on weather concerns. Both the overnight and day session ran into some tougher resistance closer to the 635 area for December.
The day’s weather update once again called for heat in plains and western Midwest over late this week into next week as well. Rains should be adequate for most of the Cornbelt heading into this high pressure ridge with the greatest threat occurring in the plains. In all this isn’t much of a change from previous runs but there is little doubt any changes in the forecast will result in big changes to price.
Some have been asking where corn price could go if acres are revised and why it is not being traded yet. Trade actually is factoring in that acres will not be what USDA gave us. On Tuesday's report, the average guess is for a new crop carryout of 1.013 billion bushels. This translates to a price more around 470. Looking at December corn trading at 630 shows us that trade is actually not factoring in the dropped acreage very well at all. Trade is well aware of the 0.911 old crop carryout expected along with the 1.013 new crop carryout and barely sold.
A larger surprise would be the unlikely move to change in yield. For tonight, prices could be a little higher as crop ratings were left unchanged instead of the expected 1% increase. Let’s keep an eye on the report and, more important, see if trade disregards the carryout number. All focus will go back to weather immediately following this report and as long as heat is in the forecast, buyers should be ready to continue with support…Ryan Ettner
Soybeans: Bulls and bears fought for position Monday as traders prepare for USDA’s numbers on Tuesday. Beans found early support from China buying 110,000 tonnes of new crop. Macro-selling pressured most of the markets and it seemed spillover selling fell into the grains as well.
USDA will release their supply and demand figures this morning at 7:30 a.m. We are expecting old crop numbers to increase from 180 million to 205 million bushels carryout. New crop is expected to decrease due to the drop in acres. We are looking for numbers to decrease from 190 million last report to 168 million. This has supported new crop up to this point. Good to excellent ratings were unchanged Monday and that is in line with expectations. Overnight trade should be mostly rebalancing.
We are going to sit neutral through the report but would keep an eye on corn for direction. Corn is still the leading indicator so you will still need to pay attention to their numbers as well…Steve Georgy
Next page: What's up with wheat?
Wheat: A higher US dollar due to continued European debt fears and more world export competition pressured the market Monday. Over the weekend, India announced that it will be reentering the world export market. This means additional competition for U.S. Exports.
The rest of the day’s market moves were due to position squaring before Tuesday's USDA report. The report will be providing the first spring wheat production estimate of the year. The average guess for the spring wheat crop is 548 million bushels. This would be the smallest crop in three years. Ending stocks for all wheat are projected to come in at 716 million bushels. This is up from the June estimate of 687 million bushels. Crop ratings out after the close had the spring wheat crop rated 73% good to excellent. This was up from 70% last week. The winter wheat crop is 63% harvested compared to 62% harvested at this time last year.
This week's trade direction will be determined by the USDA report…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.