Corn: It was no surprise that Monday’s trade was on the quiet side. The session was destined to have light volume as the government would have been closed anyway with the Columbus Day holiday.
Most of the light support came from thoughts that upcoming rains will delay the corn harvest, which trade is guessing at 35% complete. Other support continues to come from thoughts that China is buying on a “free pass” right now. It is being given that label because China can be buying corn and all traders have to work from are rumors as long as the government isn't in operation to report the sales. Old support of 440 should act as new resistance now, so look for sellers to step in to slow any bounces if we can find a bounce that far.
Other talk Monday was that eventually the funds will have to buy back their sizable short position of more than 140,000 contracts. There is no doubt that will eventually happen, which will bring a good size bounce with it, but for now they are still adding to shorts more than anything else.
Bulls saw some light volume support that will not be able to take out 440 unless the volume picks up. Bulls will always have the need for funds to short cover on their side, but it is impossible to tell when that card will be played. We don’t even know if it will occur at all during harvest. For bears, the chart level to sell from at 440 is well defined. As long as the government is closed, there is little reason to argue with a continued grind lower…Ryan Ettner
Soybeans: The soybean market took back some of Friday’s selloff to begin the week. The lack of progress on the debt ceiling debate and opening up of the government continues to keep trade volume low. Without the USDA providing updates on harvest pace, export sales and production size, the trade is flying blind and that has many participants sitting on their hands and doing nothing. There continue to be unconfirmed rumors that China had bought beans on Friday’s break, which provided support to the market on Monday. With the USDA shuttered, rumors are rampant.
With the amount of beans that China needs to purchase to meet its import demands, it would not be a surprise at all that they bought beans on Friday. The USDA is predicting that China will import 69 mmt of beans thus year. That means that they will have to buy an average of 1.3 mmt of beans a week to meet this purchasing goal.
The trade will be focusing on Tuesday’s National Oilseed Processors Association crush number as there just isn’t much new news to trade. The trade estimates that NOPA will report that the September soybean crush will have totaled 106.4 million bushels. This report would represent the first month of the new marketing year (September to August) and would represent an 11% drop from last year’s September crush. Back in September, USDA estimated the whole year new crop crush at 2.1% smaller than last year.
South American soybean planting will start to pick up over the next few weeks. The Buenos Aires Grain Exchange estimates soybean planting will increase 2.5% over last year to 20.2 million hectares.
With rain in the forecast for early this week, bean harvest could be slowed in the near term. This might give the market a bit of support. The trade is estimating that about 40% of the bean crop has been harvested as of Sunday. The average harvest pace for this week is about 58% harvested. The November/January soybean spread was trading at a 1 cent premium to the January contract on Monday, as it is still not paying the farmer to hold onto un-priced soybeans. The producer will lose 1 cent plus the cost of storage by holding beans into January. It will cost the producer 30-½ cents plus storage cost if they hold beans into July. If you are producer, the market is telling you to not to hold onto your beans; the market wants them now, not six months from now. If you choose to hold onto them, the market is going to penalize you.
How the national yield shakes out will determine the market's next move. If the USDA raises the national bean yield one bushel, it could push the market down to the August lows while a one bushel decline in yield 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. If a deal to raise the debt ceiling is not made by Thursday, it would be negative to the economy, so let’s hope Congress and the White House can get their act together…Jim McCormick
- Chinese analyst, CNGOIC, has increased its estimate for the 2013 wheat crop by 1.1% to now 122.2 mmt, up from the USDA’s estimate of 121 mmt. Also, analysts reported China has raised its minimum price level for the 2014 domestic wheat crop to $10.54/bu.
- There were no export grain inspections today as the government has still been unable to come to an agreement even as we approach the deadline to address the debt ceiling scheduled for October 17th.
- Analysts expect favorable weather for both Russia and the Ukraine over the next few days, which could improve chances for more winter wheat plantings.
- The US wheat market should find increased competition as the EU, Australian, and Black Sea wheat crops will flood the market with wheat.
- December Chicago wheat overcame early pressure and found support as the contract had its highest close over the past 5 sessions… Alex Bassett