Corn: Reasons why we think the market will decline into year end: U.S. yield should exceed 163. Our statistical yield estimate is 167, 13.5 billion crop and end stocks closer to 1.5 billion than 1.0. Our survey will be a more accurate assessment -- do not forget to call in!
Monday's crop conditions were unchanged 71% vs. 68% last year. Drought in Russia was in wheat and oat country. Losses in world wheat production have been quantified. Russia will reduce exports by about 257 million bushels (probably even less if it its fall seedings germinate well), and all European losses together are not more than 367 million bushels.
In fact, the United States could supply that entire shortage, and it would simply bring our wheat stocks from 1.0 billion bushel (50% stocks to use) down to 640 million bushels (that is a normal 10-year average). Thus, we see little if any feed usage shift to corn, and we are sticking to our price outlook and we want all producers/farmers of corn to get up to date on hedges.
Traders need to remain chart friendly or simply wait until we get a chart signal to sell. That might happen fast, so stay in touch…Bill Biedermann
Soybeans: Monday was another day of bean purchases by China. The day's amount came in at 284,000 tonnes, keeping support under this market for most of the day. This pace of bean buying has been impressive, only trailing last year slightly. Through most of the day this export business, in combination with continued dry and hot forecasts in the southwest Midwest, provided good support. In the end, November could only manage a penny and a half higher as a second round of wheat selling was found that spilled over into the other grains.
Through most of this week, we are looking at sideways trade up until the supply/demand report on Thursday. Technically, there is still an obvious uptrend in place. We will need to watch out for any decent breaks. If there is a decent setback we can end up breaking a rather steep uptrend line, causing a quick change in market direction.
With all that in mind, we will be watching the upcoming report closely. Any shocking number to the bearish side could cause a quick turnaround in technical mindset. Looking at this market from purely a speculative standpoint, you would have to be a seller on another bounce close to 1050. With next resistance coming in at contract highs of 1060, the risk to the upside is only 10 cents while turnaround to next support goes all the way back to 993. This shows us why we need to keep this report neutral or face the possibility of a quick sell off.
We can look for more calm trade up until Thursday as long as the wheat market does not throw a wrench in the plans. If Russia should find a rain in the forecast and decided to sell wheat then expect the beans to follow right along…Ryan Ettner
Wheat: On Monday morning, we saw another round of revisions to former Soviet Union wheat production. One private analysis group suggested Russia will be 43 to 44 million tonnes. That is 10 million from what USDA suggested last month! The general decline here is not surprising, though. We indicated last week to expect further declines. The thing to keep in mind here is the effect of drought, which may last another two weeks, are diminishing. Russia is harvesting right now. Further crop declines, while headline grabbing, should not be as market moving…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.