Corn: Futures closed lower Monday after a morning rally took December futures to within five cents of the recent high.
“Simply said, farmers were sellers and once funds saw wheat selling off, they dumped 4,000 contracts of corn in no time,” said a trader.
Monday's close is disappointing to the bulls as traders cited that Chinese government sales at auction were dwindling to 400,000 tonnes. Most retail traders thought this was due to tightening stocks and Dalian futures traded at new contract highs Sunday night.
However, cash traders said that the demand for Chinese government grain at auction was slow and minimum bids were not even being met as end users chose to draw on grain in storage and wait for new crop supplies. U.S. corn being unloaded has also taken the edge off their market. Cash traders also note that normally the Chinese government buys corn going into harvest to rebuild reserves. They however do not expect any rebuilding of reserves until prices fall and the pipeline is satisfied.
In other news the CFTC reported index funds long 443,000 contracts of corn and trading funds long 301,000…Bill Biedermann
Soybeans: Once again, China came in to purchase another 220,000 tonnes of beans this morning. Their daily buying streak continues. Unfortunately for the bean market, it looks as though traders have become very bored with these regular purchases and may now even be expecting them rather than being bullish from them.
ProFarmer started their crop tour today so we will be seeing pod counts on a daily basis throughout the week. Even though these pod counts are not known for being the best estimate on yield, it is what we have to go on, for now. Early estimates from South Dakota showed pod counts higher than last year and a more consistent look to them. From the producers we have talked to, it appears most would say the beans look good.
There is some sudden death found in the beans, however. We see that in the beans locally and there has also been talk of that occurring in IA and further south in IL. One bright point is that this sudden death is occurring after a fair amount of pods have already been put on. We will have to wait and see what the tour has to say about that. The trade generally remains skeptical of this tour as it always seems their numbers are bullish. The market will pay attention to them this week, so they can’t be ignored. Make sure to call in about our yield survey this week. We hope this farmer-driven survey provides a more accurate number than what we will be seeing by tours. You know your fields better than anyone.
What caused the most influence today was the fund selling in wheat which quickly spilled on over to beans as well. This is all part of the trade we have been mentioning to watch out for. Funds still have a sizeable long position so more potential selling is possible…Ryan Ettner
Wheat: Some will say Monday's sell-off can be blamed on rumors of a revised weather forecast for Russia. The floor suggests midday model runs showed more rain for some of the problem areas. Another issue that we raised last week is that the trade may have had another day or two to digest the USDA’s report. Even with those dramatic changes, there is no wheat “shortage” to speak of. We will end the 2010-11 marketing year with “above normal” stocks. It was also interesting to see today’s price decline happened when SovEcon suggested another revision may be made to Russia’s crop. This market’s psychology has changed…Rich Nelson
Bill Biedermann is Sr. Vice President at Allendale. Ryan Ettner is a registered commodities broker and grains analyst at Allendale, Inc. Rich Nelson is Director of Research at Allendale. Allendale is registered with the CFTC and NFA and is a member of the NIBA. www.allendale-inc.com.