Corn: Corn finished Monday 5 cents lower at 633 1/2. It continued to come under pressure as a lack of bullish news weighs on the market. After receiving a bearish report a few sessions ago, this market has come under pressure as funds have continued to liquidate positions. Funds sold 8,000 contracts on Monday. This brings the total to 40,000 in the past four sessions.
Next year’s crop is going to continue to come into focus as we have seen the trade bull spread corn for the past few weeks pushing the nearby contracts higher and keeping the deferred pressured. We are trading at the lower end of a range now with 630 continuing to hold as support. The lowest we have traded since the October supply and demand report was 622 on the day of the report. The trade is going to start focusing on 2012 sooner than later and we are starting to see pressure in the December 2012 contracts as the trade is focusing on extra acres and trend line yield numbers.
Currently, we have to use trend to figure our price targets and with acres coming into focus we could see several additional acres coming from the Dakotas again this year. North Dakota had planting issues last year with a very wet spring and could not plant as many acres as farmers there initially anticipated. With wheat being in ample supply, we may see more of these wheat acres find their way to corn this spring. Some will argue that these acres in North Dakota aren’t high yielding acres but by adding an additional 1.5 million acres to North Dakota, we would only see a drop in trend from 161.3 to 160.6, which isn’t a drastic drop in yield…Cordon Sroka
Soybeans: With corn and wheat closing lower due to a strong dollar, beans close higher as the cash markets firm. There is also talk of buying interest from the top soy importer, China, that is giving support as well. Inspections were strong Monday as they came in at 53.524 million bushels. That was better than estimates from Reuters newswire of 42-46 million. This could calm down the negative demand talk for a while if we can see bigger exports this Thursday.
Demand has been a huge reason for the sharp decline over the last several weeks. September was 12% behind last year and October ran 7% behind last year’s pace. USDA currently has 2011/2012 crush at 1% behind last year. That means we will need to spend some time ahead of last year to make up for the lag that we are seeing right now. This seems unlikely and could have USDA adjust their numbers once again. This is not bullish.
The charts were able to hold support today and needs to stay above the Oct. 4 lows of 1163 1/2. Resistance will be at 1193 and 1200 over the next few sessions. Now that beans are 96% harvested all the focus right now will be on South America and the outside markets. Both are negative right now so we will be looking at rallies as selling opportunities this week unless something changes…Steve Georgy
Wheat: The wheat market started the week off on a negative note as all three exchanges ended Monday lower. There wasn’t any new information to feed the bull so the sellers were able to control the market all day Monday. The macro picture also pressured the market as the U.S. dollar was higher all of the session. The higher dollar makes our wheat less competitive on the world market, and right now we are offering wheat for sale at some of the highest prices in the world. Like we mentioned last week, there is still talk that 45,000 tonnes of UK wheat will be imported into the U.S. Southeast. That is definitely not bullish for U.S. prices.
The KC market was pressured too as the recently fallen moisture has helped out the winter wheat prospects as it goes into dormancy. The traders went into today looking for the crop ratings to improve. The report release after the close showed 50% of the crop was rated good to excellent. This was up 1 percent from last week. This makes it two weeks in a row of gains.
Winter wheat planting was at 96%, one point above the 5 year average for this time of year, Wheat emergence came in at 83%. This is 1% ahead of the five year average. The Minneapolis exchange’s spring wheat held up the best today as the demand for the good quality spring wheat remains strong. The July Minneapolis is now trading at a $1.10 1/4 premium to the Kansas City wheat. Tradewise, we anticipate overall wheat prices to continue to trade in the same sideways range it has been in the past few weeks. With comfortable supplies of wheat, in both the world and the United States, it is hard to be bullish unless weather problems extend through spring…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.