Corn: Corn started off with another technical bounce on Monday due to a lower dollar but gave up those gains, and more, by the close. That makes the third trading day in a row where a technical bounce starts the day only for most of it to be given up by the close.
When corn bounces are based on the dollar, and that market is based on ever changing European news, it is hard to believe in each technical bounce lasting longer than an hour. On previous days, there has been open room lower for corn to trade but today support was finally hit. That support held well even when many other commodities fell hard going into their close.
Even though this is only the first test of support, Monday did look quite good for corn bulls by the afternoon. With 588 1/4 being first support there was little surprise that bulls would make their stand today posting a low of 589 1/2.
Looking ahead to Friday, our personal estimate is for corn stocks to rise from 843 up to 899 million bushels. Some thoughts on that increase is that USDA could see the slowdown in exports as a surprise while the increase in ethanol was expected. Keep in mind that supply side numbers will not be changed until the January report.
Bears have a recent trend, poor exports and a give up of dollar support on their side. Bulls are holding onto 586 as last remaining support as well as constantly looking for increased exports each Thursday. Let’s remember back that the last time the bulls had their back against the wall was when December was at 630 and we know how well that worked. Bulls need news and they need it now…Ryan Ettner
Soybeans: Beans found strength early on Monday but ended lower as the momentum shifted. The dollar came off the lows when the news wires released a story about S&P downgrading AAA rated EU countries. Last week’s positive attitude had investors putting money back into the markets and giving support to the beans. It seemed the markets were on edge and had seen profit taking last in the session.
The outside markets are going to remain important over the next few weeks now that we are seeing light volume as we move toward the holiday season. USDA will be releasing new supply and demand numbers on Friday and Allendale is looking for a 40 million bushel increase. We are looking at old crop ending stocks at 230 million. This would price beans at 1118 assuming South America does not dry in December.
Demand will also be a key issue on Thursday. Export sales will be release at 7:30 Thursday morning. Inspections were out today and were at 31.649 vs. 41.762 a year ago. This could be negative for beans at the end of the week if we don’t get sales again. We are still looking at selling rallies but it doesn’t look like we can get through 1150 on the January contract. 1100 should be good support on the downside…Steve Georgy
Wheat: The wheat market could not continue last week short covering rally into today with the result being all three exchanges wheat contracts closing lower. Negative economic jitters out of Europe seem to keep traders at bay as there were news stories reporting that S&P warned EU countries that their AAA rating may be at risk of being downgraded.
Also pressuring the market was some negative fundamentals that the market was talking about on Monday. This weekend’s snow event was a better than expected giving a good section of the winter wheat a good covering of snow to protect the crop from the upcoming cold. Adding to the pressure was anticipation on a negative report tomorrow from stats Canada. They currently are estimating their wheat production at 24.16 mmt. The trade is anticipating them to revise it up to 24.5 mmt. The current USDA estimate is 24.2 mmt. The trade is also looking for Australia to produce a record crop of 26 mmt this year.
The question is what the quality of this year’s crop will be as they are having troubles getting the crop harvested due to rain. Rain will not hurt the quantity of this year’s crop but it will hurt the quality making it feed grade opposed to milling quality. The one positive fundamental story out today was that Saudi Arabia bought 330,000 tonnes of wheat and the US was include as one of the selling counties.
Allendale still anticipates the overall wheat price to trade in a sideways to lower range due to the amount of wheat in the world. We do need to be careful and not get to bearish as with the funds carrying a near record short position, any positive news about wheat or the macro economy could continue the short-covering/profit taking rally we saw last week…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