Corn, soybeans, wheat sell off amid mix of fundamental drivers

Corn: After breaking 630 last week, the next true test of support for this corn market was 600. Starting out on Monday, that next support was put to the test and held well. Even though the daily change makes Monday’s trade look negative, this market did see active buying under the 600 level. Once again, this raises the question if we have dropped corn far enough to find new exports.

Unfortunately, if we do not see a large sale announced Tuesday morning, then we will have to wait for Friday. Being that Friday’s report reflects last week’s trade, it will actually be showing how much exporting occurred around the 620 level more than our current levels. It makes sense buyers would support corn at the same level where China bought last time, but if there are no new exports announced Tuesday, this market will likely continue sliding.

Funds were sellers once again on Monday. Their estimated long position tomorrow should be around 149,000 contracts. Bears still appear to have most factors on their side right now. Exports are slow, funds are selling, chart support is still over 25 cents away and the dollar continues moving higher.

Bulls might be able to find short term technical bounces, but they will need one of the bearish factors to change in a big way. Watch out for low volume trade this holiday week causing moves that make little fundamental sense. Corn could very well find an active bounce simply from a lack of sellers. If a big move is made this week in either direction, it will be important to check the daily volume to see if it can be trusted…Ryan Ettner

Soybeans: Beans closed weak on Monday, mostly from outside markets pulling back. The concern for Europe still has traders nervous to add risk at these levels. Our government’s “Super Committee” failed to come up with a good solution for reducing our debt and gave more concern for investors.

Beans will continue to lack fundamental news all week, so outside market influence will be in control. We are struggling to find any bullish news that will support the market from these levels. As we mentioned last week, demand will be a big issue to watch. With a setback in price over the last few days, we should see exports pick up. At least we hope! China bought beans last week and could buy again this week to replenish their reserve stock.

We have a shortened week this week due to Thanksgiving, so volume will most likely remain light. There is a seasonal pattern that we see beans rally going into Thanksgiving. This isn’t a good way to start the week, but we may find support in the beans based on the seasonal pattern. South America needs to be watch closely as well.

Weather hasn’t caused too much commotion lately but could if we continue to see dry weather. There is speculation that the dry pattern over the last three weeks could be the start of La Nina. We don’t feel that it is but beans could find strength if talk continues.

Argentina and Brazil are still planting ahead of last year’s pace. Farmers are 44% planted in Argentina and were 42% planted a year ago. Brazil is 71% planted vs. 68% a year ago. They are getting the crop in the ground at a great pace and it is one more reason to find beans under pressure. We are still looking at 1118 as a downside target for the January contract and want to still look at selling rallies for now…Steve Georgy

Wheat: The wheat market continued its sell off as macro market uncertainty pressed soft red winter wheat prices to their lowest price in five months. The December contract hit $5.84 1/2 which was the lowest price on the continuous chart since July 1. Minneapolis hard red spring futures were hit the worst with a 20-3/4 cent decline.

The market was reacting negativity to the news the government’s Super Committee was unable to come up with deal to cut the nation’s debt by Monday's deadline. This has renewed fears that credit agencies might downgrade the countries credit ratings. If they would do this it would definitely have a negative impact on our economic outlook and this will hurt the demand for commodities.

Also pressuring the markets Monday was more negative news out of Europe as Spain’s ruling party was voted out of power over the weekend. This makes it the third European country to vote out its controlling party out of office this year, as they fight to get their debt under control.

Monday's export inspections came in at 11.6 million. This was below the trade anticipated range of 12 to 16 million bushels. It was also reported today that Egypt bought 240,000 tonnes of Russian and Ukrainian or Kazakhstan wheat as the U.S. was shut out again. The rest of the week’s trade will be dominated by outside forces as we will be watching for more news out of Europe and fallout from the failure of the U.S. Debt Commission negotiations.

The trade action will be choppy as volume tends to be light on this shortened holiday week. Allendale still anticipates the overall wheat price to continue to trade in a sideways to lower range. With comfortable supplies of wheat, in both the world and the US, 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.

About the Author

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

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