Corn: Bullish factors were adding up Monday morning, making new contract highs seem like an easy target. First off, expected rains over the weekend missed the key areas that needed it, which allowed the beans to offer good support throughout the day. Second, the forecast for rain during this week was pushed farther north allowing for even more support later in the week.
Finally, everyone expects some low-yield talk from the Pro Farmer crop tour this week, and there is good reason to find best support Tuesday and Wednesday. That will be the time when each crew will cut through the areas expected to find most damage (Illinois). We have started our two-week crop survey. Our method allows us to take a much larger acreage sample and hopefully achieve very accurate results. We look forward to hearing from everyone at either (800) 262-7538 or www.allendale-inc.com.
As the trade goes throughout this week, we will have to expect strong support from grain fundamentals. Outside markets are the most likely source for any selling in the corn. Any pullback that can be found will likely find fast support. In outside market consideration, analysts are talking about Bernanke’s upcoming comments for Friday. Realistically, it is hard to assume a QE3 announcement but if that is the thought circulating in the market, expect more dollar weakness, which will mean outside market support through the week to go with yield talks.
Overall, bulls have a good number of issues on their side while bears do not have much to talk about right now. Monday afternoon’s crop ratings fell 3% from last week to 57% good to excellent. Top states, in order of production…Iowa -4%, Illinois -8%, Nebraska +1%, Minnesota -5%, and Indiana -1%. The current 57% rating, if it holds, would be the lowest end of year rating since 2005 when yields were 148. Once again we will assume a bullish week while keeping an eye out for potentially bearish factors to arise…Ryan Ettner
Soybeans: Beans were strong Monday, finishing more than 16 cents higher on weather concerns. This will remain the focus as we finish the month of August. Weather maps are showing cooler temps but still lack of rain. The rain that fell over the weekend was wide spread but the totals were disappointing. Soybeans are in their yield-setting phase right now. Leading into this period, precipitation has trended drier in #1 Iowa, #2 Illinois, and #3 Minnesota whereas #4 Nebraska and #5 Missouri have improved. We will wait until the end of the month before deciding to lower our yield estimate or not. This rain is crucial.
We are still targeting 1420 in the November contract and will keep that as our target. Conditions were released Monday afternoon and overall good to excellent ratings fell 2% from last week. This is going to be looked at as friendly for the overnight trade. The top states, ranked according to production, were…Iowa -4%, Illinois -4%, Minnesota -5%, Nebraska +1%, and Indiana -2%. Keep in mind the technicals are approaching 1400 again and have been good resistance over the last several months…Steve Georgy
Wheat: The wheat market continued its upward march again Monday. It surged on the open on the coattails of the row crops then closed off of its highs as a bout of profit-taking hit the market.
The market is still concerned about potential production short fall in the spring wheat areas. After battling flooding to get the crop in this spring, being hit with extreme heat during the flowering stage, wheat is now fighting harvest delays.
The results are showing up in disappointing yields. Newswires are reporting yields down anywhere from 5 to 10 bushels below normal. The crop progress report released after the close showed 29% of the spring wheat had been harvested compared with 49% last year. As for the ratings, 62% of the crop is rated good to excellent while 10% is rated poor to very poor. Last year at this time it was 82%.
The trade is also focusing in on the continued drought in the Southern Plains. There currently is no big rain in the forecast to bust the drought down there. The trade is worried that without moisture soon, farmers will choose not to sow this year’s winter wheat crop. We do believe it is a little early to worry about dryness this fall but agree that time is running out to rebuild the depleted soil moisture. What this region of the country needs is a hurricane to help break the dryness trend. This week’s wheat trade direction will be dictated by outside market forces and spring wheat harvest results. Wednesday’s Stats Canada crop production numbers will be watched closely as well…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 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.