October 11, 2011
By: Craig Haugaard, Grain Origination Manager
CORN: 1 higher
The market had a pretty wild night Sunday evening as fantasies about Chinese buying and a lower dollar drove the traders into a bullish speculative fervor. As the sun came up and the day session kicked into high gear the wild excess of the previous night soon faded. When there was no sign of China showing up to buy we saw the prices slip from the higher levels although they still posted a positive close for the session. Also helping to support the price of corn was the fact that the dollar was dropping faster than green grass through a goose. The question for the day is, “Does the market do anything today or do we just chop sideways and wait for the USDA report in the morning?” I would tend to be of the opinion that we should see an unremarkable session today. Coming into the October 12 report the average trade estimate for the US corn yield now stands at 148.7 bushels per acre, up 0.6 bushel from USDA’s September forecast at 148.1 bushels per acre. The average trade total production estimate is 12.471 billion bushels which reflects a production reduction of 26 million bushels with a reduction in acres offsetting the increased yield. Technically nothing has changed with two of my three technical indicators remaining bearish. We have solid support at $5.75 in the December futures and if we assume that level will be the low for this move the Fibonacci numbers would suggest resistance in the December corn futures at $6.52 level.
SOYBEANS: 13 higher
I think if there was one underlying theme in the bean market yesterday it may have been that the expectation now seems to be that we will see a large residual disappearance in future stock reports as a result of the extremely dry beans that are being harvested. That coupled with harvest reports that are reflecting a yield that has become more disappointing as harvest heads into the gun lap pushed prices higher yesterday. With that in mind it is interesting to see that the average trade guess on this, the final morning before the new USDA report, reflects an expected yield number of 41.8 bu/acre, unchanged from the last report. From the perspective of total production we are seeing a number that reflects a 4 million bushels reduction from the last report as the trade looks for fewer harvested acres. Taken as a whole the trade is looking for the 2011/12 carryout to come in at 185 which basically means that they expect the export number to be reduced by 30 million bushels. If the demand numbers are left unchanged we would actually see the carryout experience a year to year drop. From a technical perspective, two of my three indicators are now bullish. Under the fun and games category, if we make a wild assumption and assume that the double bottom in the $11.52 area is the low for the time being and we run the Fibonacci numbers off of that to project resistance on the upside you can make the case that we could head to $12.72 before we run into a great deal of resistance. Before I get that carried away I will want to see what the report gives us in the morning.
WHEAT: 5 higher
I was trying to find the latest drought monitor map this morning and the following is the most recent that I could find. They have had some rain since this map was released but in talking to folks in the heart of HRW country is sounds like they are still as dry as the dust in a mummy’s pocket and that is supportive to this market. On the flip side we still are fighting cheap Black Sea wheat and of course the news that I shared with you yesterday about the record grain crop in Kazakhstan could also add pressure to this market as well. In looking towards tomorrows report the average trade estimate for the 2011/12 US wheat carryover at 733 mil bu is down from USDA’s last report of 761 mil bu. Technically nothing much has changed with all three of my technical indicators bullish HRS and the same three are all bearish HRW. Kansas City futures actually like kind of pathetic yesterday and I hated the way they closed but unless corn really breaks lower I suspect that we will find some support in the Kansas City futures against last week’s lows.
The information contained above was taken from sources which Wheat Growers believe to be reliable, but is not guaranteed by Wheat Growers as to accuracy or completeness and is made available for information purposes only. There is a risk of loss when trading commodity futures and options.