Corn: More short covering was seen in corn Monday, which offered a small bounce again. A key difference between Monday’s trade and the recent trade we have seen is that it was on strong volume. This is a sign that for all contracts short positions covered were offset with quick selling.
Yield reports continue to suggest that is the right course of action. If funds want to be buyers to exit their grain trades, there are plenty of cash and futures hedges to take advantage of any bounce. If we do see the short fund position shrink after Monday’s trade, it doesn’t necessarily mean that funds are turning bullish. Right now, there continues to be a serious lack of news and direction for this market, which doesn’t work for the funds. Funds can not sit in markets that go nowhere; they are better to take money out of the grain markets and put it somewhere that it can earn.
Technically, this corn market still has room for a bounce a little over 450 just to reach the recent downtrend line. This allows for even more of a bounce before technical traders need to be active sellers.
Harvest weather suggests a five-day clearing followed by moderate rains in the six- to 10-day forecast with another clearing in the 11- to 15-day outlook. Fundamentally, the direction goes with the corn bears with an analysts’ estimated carryout now at 1.936 billion bushels, which is 81 million bushels more than the September crop report. This comes from using a 157 yield number with 1.1 million less acres. The recent move goes with the bulls as larger money is still leaving this market to offer a bounce. Also, add in that there were rumors of China buying 900,000 tonnes of corn, occurring at a time where there is no one around to disprove that talk…Ryan Ettner
Soybeans: Soybeans put in anther choppy session as a lack of fresh news has the market acting erratically. It was officially announced Monday that the USDA will be delaying the release of the October crop report until an undetermined time. With the House, Senate and the White House digging in their heels, it looks like the budget mess will last for a while.
The drop dead date to get a deal done is Oct. 17 as that is the day the United States will hit its borrowing limit. If the debt ceiling is not extended by that date, the United States will default on at least a portion of its debt. Most economists believe that if this happens it will have a disastrous effect on both the U.S. and world economy. Even with the government shutdown, we did get export inspections Monday that showed 30.55 million bushels of beans were shipped out last week. There were no other reports today due to the shutdown.
The trade is estimating that bean harvest has reached the 22% to 24% level as of Sunday. Usually, we have harvested about 40% of the beans by now. Reuters news did a survey of analysts to get their view of the current crop size. The survey showed that the average trade guess for soybean production was for a 3.156 billion bushel crop with an average yield of 41.548 bushels per acre. In September, the USDA estimated the crop at 3.149 billion bushels using a national yield of 39.60 bushels per acre. The trade is looking for the harvest acreage to drop and is estimating harvested acres at 75.933 million down from the USDA's latest planted acreage number of 76.378 million. The trade is looking for ending stocks to increase due to a bigger carry in and increase in production size as they are estimating ending stocks at 167 million bushels.
In September, the USDA estimated the soybean ending stocks at 150 million bushels. After a wet weekend, soybean harvest has slowed down but with a dry week in the forecast, harvest progress should pick back up. How the national yield shakes out will determine the market’s next move. If the USDA raises the national bean yield 1 bushel, it could push the market down to the August lows, while a 1 bushel decline in yields could bring the market back to the $13.50 level.
Until Washington gets its act together and gets the government up and running and the debt ceiling raised, trade volume will be lacking and the trade will be hesitant to push the market hard in one direction or another…Jim McCormick
- SovEcon has lowered its estimate for Russian wheat planting by almost 3.5 mln hectares to 13-13.5 mln hectares. As a result, Russia could lose up to 7.5 mmt of their wheat crop due to the excessive rainfall.
- Russia could see 2014 wheat production of 42.5 mmt, which would be considerably lower than this year’s projection of 50 mmt. Ukraine’s 2014 production could come in at 15 mmt, down from this year’s production of 22 mmt. The production is expected to decline due to rainfall.
- Weekly wheat grain inspections came in at 29.781M versus last week’s inspections of 32.973M bu. There were no estimates released.
- The average estimate for wheat ending stocks for the delayed USDA report is 519B bu. September’s ending stocks totaled 561B bu. Due to the government shutdown, there will be no USDA report October 11th; the estimates compiled were from private analysts.
- December Chicago wheat rallied once again on quality concerns and good export demand. As the government shutdown continues, we could see continued strength due to the lack of fundamental information…Alex Bassett