Corn: No doubt here at all, corn was subject to the same selling that hit almost all other markets on Monday. During the day, we saw some of that reliable, stubborn buying in the middle of the day but shortly after that, the stock market stumbled again. This helped bring corn with it.
Corn fundamentals remain largely unchanged. USDA will lower yield and ending stocks in the next few months. For the short term, more rain has been put in the forecast. Technically, this market still has room for December to move down to 663 1/4 before finding strong chart support.
Supportive factors for corn are that the condition rating did drop from 62% GTE last week, down to 60% this week. That will support more post-report estimates on yield lower than what we saw last week. Again, while the trade estimate for Thursday’s report is 155.2, most are estimating a final yield closer to an even 150. Based on the production and yield numbers on the survey for Thursday’s report, we compute the trade is looking for a harvested acreage drop of 590,000.
As we see things, this will mean that we are looking at only a slightly bullish August crop report with even lower yield estimates to follow. Just as a note, some of the strongest buying we have seen the past two weeks has occurred on a Tuesday. Outside markets will determine if that is to be seen again this week.
While this report on Thursday should be bullish, we do not expect enough to be included to cause a major rally. A push to later year highs is more likely as yield estimates continue to fall -- that is, if outside markets can slow down first…Ryan Ettner
Soybeans: Beans fell 24 1/2 cents as many other markets melted down around it. As we talked about last week, we are seeing more of a risk off mentality. Funds were sellers again of another 6,000 contracts and it is now the fourth straight session of selling.
Crop conditions improved Monday by 1%, to 61% good-to-excellent. With rain still in the forecast for most areas this week, we may see improvements on the ratings next week as well. Beans are up against the lower end of the range, but they have us concerned.
Crude and heating oil could be just the factors to break the support if we continue to watch them plunge. Heating oil and bean oil are tied together through the biodiesel connection. If this selloff continues we can see a lower demand for fuel and therefore lower demand for bean oil that will impact soybeans. The outside markets will be the biggest factor once again so watch them for early market direction overnight…Steve Georgy
Wheat: The wheat market started lower and stayed lower for the session Monday. The market moved down in the futures overnight on the announcement Friday that Standard and Poor’s downgraded the US debt from AAA to AA+.
The Dow Jones Industrial Average continued to see liquidation Monday as it managed to fulfill the head and shoulders pattern that many technical analysts have been watching. The current correction wheat is seeing is about 9%; other recent corrections have been as much as 15%. The outside markets are weighing on the grains as funds continue to liquidate their positions another 5,000 in the wheat Monday.
The report on Thursday is expected to be bullish for the grain markets with the USDA expected to drop yields in corn and beans. A sale of 100,000 tonnes of hard red wheat was made Monday to an unknown destination this morning. Grain inspections for last week’s shipments also came in Monday above trade estimates as well. Trade expected 17-22 million bushels and it came in at 25.238 million bushel.
European wheat futures also closed down Monday’s session based on growth concerns in the Eurozone as well as the U.S. debt downgrade. Estimates for Thursday’s report are for a slight increase in ending stocks from 670 to 671 million bushels.
In other news, spring wheat ratings fell by 4% Monday afternoon and are now 66% good to excellent. This is a good deal lower than the normal 82% rate. Look for the wheat market to continue to see pressure as the outside markets continue to see a large scale sell off…Cordon Sroka
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 Senior Broker/Manager at Allendale, Inc. Allendale is registered with the CFTC and NFA and is a member of the NIBA. www.allendale-inc.com.