Corn, soybeans hit by hot, dry weather forecast

Grain & Oilseeds Report

Corn: There were a few factors that helped push the corn up through 500 today. Weather would be the most obvious reason with 10 days of a heat wave that includes virtually no rain over that period. This is being seen as mainly a bullish story for the beans, but it did offer enough spill over support to corn to offer another factor of support -- fund short covering.

Some short covering was seen overnight, but as soon as 9:30 came around, when funds normally trade, a secondary push was seen in this market that was obviously short covering. Floor sources estimated funds to still be short 97,000 contracts as of the close on Friday. Once we see how much short covering was done Monday, it will be possible to see just where corn should be if funds end up flat in the corn market. Resistance of 490 was taken out with little effort leaving the next December resistance at 528-1/4. There was some selling seen on the close that eased ideas that this market would jump in the overnight market as well.

For Monday, the bulls had everything on their side. At noon, the rainfall forecast showed nearly nothing out a full 15 days to go with the heat wave. Bulls also have fund short covering, and once we have an estimate how much was covered, we can estimate how much more is due. Bears had to take the sidelines.

One potential benefit for the bears is that the forecast is completely dry. That means going forward any rain seen in the forecast will be bearish. Bears will want to stay cautious as long as fund short covering continues. Next resistance in December is 528 1/4…Ryan Ettner

Soybeans: The bean market accelerated out of the gate Sunday night, and it continued into the day’s session. At one time, both the November and September contracts traded limit up, 70 cents higher for the day. We did see some light profit-taking at the end of the session, and the market came off limit.

For the day, the November settled 61-½ cents higher on the session at $14.89-½. This was the third highest settlement ever for the November contract. The contract high for the November contract was made back on Sept. 12, 2012, at the $14.09-¾ levels.

Weather continues to be the driving force for the move as the continued hot, dry forecast has the trade convinced the crop is getting smaller. Allendale believes that the national yield has been hit due to the heat and dryness and believes the national bean yield is now 41 bushels per acre. The latest USDA yield estimate was 42.8. We are currently estimating this year’s soybean production at 3.080 billion bushels. This is down from USDA’s August estimate of 3.255. This is made using a 1 million acre decline from USDA’s August planted acres (in addition to the 550,000 decline they made on Aug. 12) and a yield of 41.0 (vs. USDA's 42.6). With this crop size in mind, we look for beans to trade in the $14.00 to $14.50 level with a chance to trade as high as $15.00 if the forecast stays hot and dry. Crop conditions released after the close show that the good to excellent rating fell 4 percentage points to 58%. This was in line with the trades’ expectations. The five-year average for bean ratings is 57% good to excellent. If you take out last year’s number and use the previous five years, the average is 64% good to excellent. Monday’s export inspections came in at 2.461 million bushels, which was also with in the expected range of 1.0 to 4.0 million bushels.

In news out of South American, it is being reported that they are anticipating this year’s soybean production to hit 88.4 million tonnes. This would up last year’s 81.46 million ton crop. With extreme heat and not much rain in the forecast into next week, we would anticipate the bean market should find support on breaks. We would not recommend fighting the market’s upside momentum until the weather changes. Without much needed moisture, we would think the crop will be getting smaller. The next level of resistance for the November beans is the contract high of $14.09-¾…Jim McCormick.

Wheat:  

  • Weekly wheat grain inspections came in at 31.192M bu, which was better than the estimates ranging from 26-30M bu.  Last week’s inspections were 33.79M bu.
  • Saudi Arabia’s GSFMO bought 720,000 tonnes of HRW for November and December delivery.
  • China bought 220,000 tonnes of French wheat for August through October delivery. This marks the first time China has bought wheat from France in 9 years.
  • Conab, Brazil’s Ag supply agency, has lowered estimates for Parana’s wheat production to 1.98 mmt, which is down from the previous estimate of 2.7 mmt.  As a result, Brazil could be in the market for additional shipments of US wheat.
  • South Korea’s Nonghyup Feed Inc. decided not to buy any wheat in their 60,000 tonne tender.
  • September Chicago wheat ran through the 50-day MA of 660, but settled the day below it as the corn market gave up some gains at the end of the sessions… Alex Bassett
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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