Corn: It is well understood by now that recent support has come from the dollar, and that continued again Monday. Corn started out with good buying on the opening due to the dollar being down over 100 points. Through most of the day following that bullish start, many of the early buyers looked to liquidate even though the dollar continued to remain weak.
This goes along with expectations as any speculative buyers, trading based on the dollar, will most likely be profitable as long as the USDA does not put out some bearish surprise on Wednesday. While we feel that a continued lower dollar will certainly drive corn back up it is easy to understand why speculators are waiting to do so. Why risk buying today when you can wait until Wednesday and have the supply/demand report behind you? As long as that report is neutral to bullish then a falling dollar will continue offering support.
Analysts estimate for yield on Wednesday’s report is for 148.9 which is only a slight increase from the last number of 148.1. In regards to the all-important carryout number, analysts are looking for 795 million bushels compared to the last number of 672. Most of that increase is coming from additions off the last stocks report. Lastly, we are looking for a decrease of 500,000 harvested acres which is also reflected in the expected carryout.
Monday's low volume bounce becomes a likely target of a “turnaround Tuesday.” If a setback occurs tomorrow or not, it will not have large importance as the “real” trade will start on Wednesday morning…Ryan Ettner
Soybeans: Beans were able to close strong with the November contract gaining just better than 19 cents on Monday. This is the strongest close the beans have had since the highs were made back in August.
Funds bought 8,000 contracts and were able to have more volume than corn today. We are really looking for a close above the 1190 area to signal a bottom. The November contract peaked just above that point today but still remained strong. The dollar fell sharply and gave great support to commodities in general. The stock market closed strong and crude oil finished $2.75 higher. If this relationship continues, we could see more upside in the beans for the short term.
USDA will release new supply/demand numbers on Wednesday and they have kept traders on their toes lately. We are not expecting a big change in numbers. South America will be our next focus as we get past this report. The major growing regions have been dry but rain is expected later this month. Argentina and Brazil will be planting soon so the focus will not be on our harvest but how many acres they are planting and what conditions. Beans have found good support at the 1150 area with resistance at today’s highs 1193. Watch the outside markets for early direction tonight…Steve Georgy
Wheat: The wheat market rallied on positive outside market news Monday. What is even more impressive, the market rallied in spite of some of the best rains to fall in the Plains in months. The rain that fell over the weekend was variable with some areas receiving up to 6 inches of rain in Texas and Oklahoma. Another round of rain brought 2 1/2 to 5 inches of rain to parts of Nebraska and western Kansas. Most other parts of the region received between 1 and 2 inches. This rain will allow winter wheat planting and establishment to accelerate compared to the past few weeks.
The strength in the market came from positive news out of Europe. Over the weekend, Germany and France announced intentions for a plan to recapitalize European banks. This news eased the concerns of the world markets about the world’s economies. This had traders selling the U.S. dollar and buying assets across the board on a risk on trade mentality. Tuesday’s trade will be driven by position squaring for Wednesday’s USDA report. For general wheat pricing, trends in the dollar and macro issues will be the major driving force in price movement….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.