Corn: There were bullish signs seen in this market on Monday to start a new week. While it is still far too early to start talking about the low being put in, positive signs are just what the bulls have wanted to see. While a stronger day was seen through the day trade, it was easy to see that any dollar bounces throughout the day were quick to pull the corn off of its highs. This shows that while the corn is trying to rally from being oversold, it has not yet divorced itself from macroeconomic issues.
A strong day is a first bullish sign but taking out Friday’s highs of 658 3/4 would go much further in attracting more speculative buyers to this market. Buyers are well aware this corn market is extremely oversold which means they also know a large bounce is in store. If that is the case then there is no need to try and pick a bottom. If this market manages two more days higher, would buyers really think they missed out on buying? With most sellers targeting 700 as first targets then missing early buys can still mean enough room for buying down the road.
Bears will say that corn is still tied to macroeconomics as well as potential end of month/quarter fund selling. Bulls will point out that even though the dollar chopped around, corn remained higher all day showing that some bottom buyers are already interested in putting money back into corn. Buyers have a long potential road of moving price higher but who is to say it started today? We will choose to try the long side but wait until this market shows more than just one bullish sign before doing so.
As for corn fundamentals we will be seeing a quarterly Grain Stocks report on Friday and that report could be a wild card. Because the number on Friday’s report is so uncertain, we expect a large reaction higher or lower based on what we see. This also explains why previous reports this year have resulted in big moves once released…Ryan Ettner
Soybeans: Beans closed well off the lows Monday as most of the outside markets rallied from last week’s losses. The question will be…Can we do it again? The overnight lows will be very important to hold this week. Now that the November contract is still more than $2 off the highs, are we done yet? This is a 16.3% selloff and is the largest we have seen this year. The next largest pullback was 12.8%. We feel that we can see a bounce from these levels and potentially a larger recovery if we start to hear about harvest problems.
Friday USDA will release quarterly grain stock and we are looking for old crop to have a carryout number near 222 million. This should be figured into the beans at these levels. As we motioned earlier, can we do it again? The charts need to find support instead of this continual slide. If beans find traction we are looking for an upside target short term near 1282 and 1326. We are going to try and buy calls at these levels to test the upside. Outside market influence needs to be watched very closely this week as this is the end of the month and the end of the quarter…Steve Georgy
Wheat: Wheat continued its rebound rally Monday, closing higher across all the exchanges. The US dollar was also weaker most of the day which was a little positive for the market. The Minneapolis December wheat contract led the wheat market again today closing 19 cents higher on the session at $8.70. Spring wheat continues to lead the way higher as the market is anticipating some bullish news from the Small Grains Summary that will be released on Friday. This report revises production of wheat, oats, barley and rye.
Allendale is projecting the spring wheat production to come in at 469 million bushels compared to the USDA’s current estimate of 522 million bushels. Allendale is projecting total wheat production to fall by 70 million bushels on this report. There is also renewed concern about dryness around the world. Currently the trade is watching dryness issues in Argentina, Ukraine as well as the U.S. hard wheat belt. With two decent closes in the past two trading sessions, everyone is asking if the wheat “bottom” has been put in.
We cannot call the bottom to this market just yet, but it is nice to see two higher closes in a row. At least at this time, it looks like the panic liquidation that when have been experiencing has run its course. We will have to watch the macroeconomic picture as more bearish news out of Europe or the US could causes another round of liquidation. Allendale is not bearish at these price levels but we would not recommend chasing rallies at this time...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.
