Corn: To start Monday, corn first saw some follow-through selling, but it didn’t last long. We know that corn is one of the commodities that has the most bullish speculators. This was likely the group that helped buy corn back when early selling ended. The short-lived selling did not appear to involve fund liquidation despite a much higher dollar trade today. It is also quite possible that because of this lack of fund selling, speculators felt a bounce can be sustained.
While current carryout does not suggest a price below $6, we should not attempt to fight the trend too much right now. We know that corn finally picked up exports at that $6 price. Any bounce too far above that level may slow those sales once again which is something we certainly do not want to see. That fact should offer support as long as exports remain at the expected 700,000 tonne pace.
The recent technical trend has been for good support to come in near 580 with resistance around 600. While breaking 580 would look horrible on the chart, we are not so quick to believe it would result in a fast move lower. Enough fundamental supportive factors have arrived to support technical weakness as well as fund selling.
Bears still have the trend on their side and a general lack of positive news. Bulls continue to find enough buying to provide support but news is far from suggesting any type of near term bounce…Ryan Ettner
Soybeans: Beans managed to find a way to close more than 15 cents off the lows. The outside markets looked negative early and emotion pushed prices lower off the start. With the new numbers from USDA on Friday, January beans should be at 1118 based on stocks to use.
We are currently running below that price and was probably a reason why we had seen good support at lower levels. We should see buying support on dips now that this report is out of the way and traders are going to shift their focus to South American weather. Brazil is seeing light drying right now. Moderate drying is seen in Argentina. Brazil produces more beans than Argentina but will still be important because bean stocks are tight.
We would like to make a point that since Dec. 1 we have seen estimates for Brazil’s soybean crop being scaled back. On Dec. 8 Brazil’s government agency, Conab, released their number that was significantly lower than they had previously advertised. They moved from their previous estimate of 75 million tonnes down to 71.29 million. USDA did not change their estimate last Friday.
AgRural, a research firm in Brazil, released estimates today at 73.1 million. With that said the government and other Brazilian research firms are coming out lower than USDA. This should support beans on any breaks below 1100. We are going to try and buy beans tonight on a pullback risking a move below today’s lows…Steve Georgy
Wheat: The wheat market continued to be pressured from Friday’s bearish WASDE report. On Friday, the government put the U.S. ending stocks at 878 million bushels, up 50 million bushels from their November estimate.
On the world front, the USDA raised world production by 5.7 million million metric tons (mmt) to put ending stocks at a comfortable 208.5 mmt. This puts the world stocks to usage at 30.7%, which is up from last year’s 30.5%. This puts the world supply situation on a bearish path without any major production problems.
Also pressuring the market was a higher U.S. dollar. The dollar was higher on fears that Friday’s solution to the European debt crises would fall apart before it could be fully implemented. Weekly wheat export inspections were 16.504 million bushels. This was within the trade’s range of expectations. On the sales front, Jordan tendered to buy 100,000 tonnes of wheat for February or March delivery. In their last tender they purchased Ukraine wheat so it would be a surprise it they purchases U.S. wheat.
Weather was also considers bearish as the forecast looks pretty good for the U.S. plains as more snow and rain is on the way. Allendale anticipates wheat will continue 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 too bearish as with the funds carrying a near record short position (short 43,700 coming into today’s trade). Any positive news about wheat or the macro economy could cause a short-covering/profit-taking rally as we wrap up the trading year…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.