Corn: It was another active trading day in corn on Monday, which saw early fund selling drive corn through yet another support level only to end a quarter cent in the green on rumors.
First, a focus on the morning’s selling shows that the 100-day moving average was taken out at 684. In all, it is hard to call that level strong support where 663 1/4 is much more important. Chartwise, if 663 cannot be held on any fund selling, it opens the door to next strong support being 575 1/2. Anyone can look at that next support level and see how important it is to hold next major support and not open that door. Funds could not have traded more typical than ever with heavy selling ending almost exactly at 10 AM, which is just when you expect to see it slow.
Rumors were then circulated that China may have come in and bought corn from either the US or Argentina. That rumor can be the catalyst for good support over the next few days at least. If funds stop selling, then this China rumor can even lead to a decent bounce.
It is important to put this recent drop in corn in perspective by comparing it to previous setbacks we have seen. Using Monday's low, we see that the recent slide amounts to a 13.2% setback where an average “normal” pullback this year has been more around 16%. All of the previous pullbacks we have recovered from and made new highs which makes even Monday's selling fall short of thinking we are about to see long term liquidation. Bulls are simply waiting for fund selling to end to give this China rumor more teeth and spark a fall bounce. China buying would be the bull’s perfect counter to fund selling. Bears are simply looking for the fund selling to continue which did not miss a step Monday, so they have to look for more selling tomorrow. Buyers have been waiting on the sidelines for either rumors like the one seen today or just simply for the funds to stop selling…Ryan Ettner
Soybeans: Beans fell again and continued the downtrend that we have been in for the last 12 days. Funds were sellers of 7,000 contracts today and this was the sixth straight session they have been getting out. Most of the selling was due to the outside market influence as the dollar rallied sharply with just about everything else pulling back.
The concern for Greece has the euro continuing to break and keeps the dollar strong by default. The charts are still pointing lower now that we closed below 1350. Beans are back in the major sideways range that has formed from March. If we can’t close back above 1350 tomorrow we should retest 1300 this week.
The lows Monday would be a 9.5% break from the recent highs. Beans should be right in line with past breaks and should find support at these levels. We are going to look at buying beans on a retest of 1310 and keeping a stop below 1300 if we see further selling…Steve Georgy
Wheat: Once again the wheat market sold off Monday on weak demand, rain in portions of the Southern Plains, and weakness in the outside markets. This was the ninth straight decline. Some decent rain coverage fell in parts of the Plains over the weekend. The better moisture prospects should allow a better environment to get this year’s winter wheat crop planted.
The afternoon crop progress report showed that 14% of the winter wheat crop was planted as of Sunday night. This is down from the 19% planted last year at this time and 20% planted on average. The U.S. dollar was also trading higher Monday, which put additional pressure on the market. The dollar was up on ongoing concerns of the Greek debt situation. With weak export demand due to excess export supplies around the world, a higher dollar just makes the U.S. less competitive.
The corn market did manage to rally off of Monday's low allowing for the wheat corn spread to continue widening. The Chicago wheat ended up trading at a 19 1/4 cent discount to the corn on Monday. That wheat is trading at a discount to corn will encourage the continued feeding of wheat to the livestock industry. This should be viewed friendly for wheat and bearish for the corn market.
The rest of the week’s trade will be dictated by amount of additional rain that falls in the Southern Plains and what the outside markets are doing. The technical picture is negative with the market trending lower. Stochastics, a technical indicator used in sideways markets, show an oversold condition. This means we could get a technical bounce at any moment…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.