Corn: Monday showed some light buying strength, which was most likely a technical response to the market being oversold. Typically, any market that is this technically oversold will see bounces on no news at all. Our problem with corn is that during fall, it will take more than that to cause a bounce worth selling.
Yet another morning has gone by without any export announcements. After 40 more cents were taken off the price of corn on Friday it was not good to see no new exports. This will make many wonder just what price it will take. Any bounce will be welcome in this market as it helps to avoid hitting more fund sell stops. Funds were estimated to be long 159,000 contracts as of Monday morning. Any time the funds get their longs to around 70,000 long positions, they will then be considered “flat.” It is rare to see them actually get down to no long positions at all. Moving higher on only a technical bounce simply buys this market another day to find better news.
Looking back on the technicals, we see that while the overnight took out support of 575, Monday's day session did not. That will still be our next level to watch for some support. Even with the bounce, the bears are still in control. Bears will point out that the trend is their friend, buyers of U.S. corn are still not appearing and funds can still liquidate another 89,000 contracts before getting “flat.”
As of Monday, all the bulls had is that this market is technically oversold and that is just about it. Being “due” for a bounce does not typically cause one. Bulls still need export business or a dollar drop as the two most foreseeable causes for a good bounce in this market. When a bounce is finally seen, the question we need to ask is: Are funds putting money back into this market? Corn will have to see fund reinvestment to put together a bounce back up to levels that the bulls are advertising.
Look for more buying in the wheat like was seen on the close for a sign funds are putting money back in grains. That is the market they are short, so that is what they need to buy first…Ryan Ettner
Soybeans: Beans closed lower on Monday mostly due to outside market influence. Crude oil fell almost $2.50, keeping a negative tone on bean oil. The dollar continues to help fuel the long liquidation with another 100-point gain.
Weather hasn’t been talked about much, but the chances to get in the fields are great this week. Crop progress this week is showing beans at 19% harvested, and producers have a significant chance to improve on that number.
There was not much news Monday as traders pushed beans both sides of unchanged. One of the stories on the floor was that Brazil could be looking at a record crop this year for beans. They are projecting 75.2 million tonnes versus 74.9 million tonnes. It is still early to be talking about a crop that is just getting in the ground.
Funds sold 2,000 contracts Monday, but the outside markets will still be the primary focus this week. USDA will release production numbers next Monday that may give us a bounce near the end of the week…Steve Georgy
Wheat: All eyes are on wheat. The decline in Chicago wheat prices, of 26%, is just like corn. Unlike corn, fundamentals have not really “worsened.” There are no reports of better-than-expected yields to report. Harvest pressure is a done deal. In fact, you could argue they have gotten a little better during this time. The lack of moisture during winter wheat planting has many analysts just itching to hit the “lower yields” button already. Lower production, to the tune of over 100 million bushels, could eventually trump concerns about poor exports.
With a 26% correction and potentially improved fundamentals, the grain trade is hoping to see wheat be the first to make a solid bottom and the first to rally. For the day on Monday, funds were buyers of 5,000 contracts. That afternoon crop progress report showed winter wheat planting at 42% complete compared with a five year average of 53%…Rich Nelson
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.