November 3, 2011
By: Craig Haugaard, Grain Origination Manager

CORN: 6 higher

Back in the dark ages when I was in junior high we had a section in gym class that was a unit on wrestling.  One day we were practicing takedowns and this kid shot in on me and as he did so his head nailed me in the solar plexus and the next thing I knew I was on the ground gasping for air.  He had knocked the wind out of me.  I was reminded of this yesterday as I watched the Informa report knock the wind out of the corn market.  As we head into next weeks report we have had a couple of different story lines that folks have been floating.  One was that the national average yield is going to come in lower than what we had in the October report and the second is that we could see the USDA reduce the amount of exports they are projecting.  I would argue that the Informa report may give us reason to contemplate a third story.  What happens in the national average yield increases and the export number decreases?  That is the fear that we started to see reflected in this market yesterday.  The following numbers are the October USDA numbers with yesterdays Informa numbers used in place of the USDA numbers for yield and production and the export reduced by 100 million.  As you can see, that scenario would take the projected carry-out to over a billion bushels and limit any rally potential.

Planted 91.9
Harvested 83.9
Yield 149.5
Production 12549
Carry-In 1128
Imports 15
Total Supply 13692
Feed/Residual 4700
Food/Industrial 6410
Exports 1500
Total Use 12610
Carry-Out 1082

In news from around the world I see one private analyst this morning is projecting that the Chinese crop will be 189 MMT.  That is up from the 182 the USDA is using.  There was also a story that Argentina is close to working out a deal with China that will allow them to start shipping corn to China in the next few months.  We will want to keep an eye on that.  Technically we are still muddling along in a sideways channel with two of my three indicators currently bearish.

SOYBEANS: 20 higher

We had kind of a blah reaction to Informa’s soybean projection.  Coming in with a national average yield of 41.8 bu/acre and a total production of 3.082 it would give us 22 million more bushels than the last USDA report in terms of total production.  If we assume all of the other USDA numbers are gospel then Informa type numbers would swell the carry-out to a number of approximately 182 million bushels.  Add good South American weather and planting conditions into the mix and we could be setting the stage for a declining market in the future.  Those of you out there that are still sitting on this year’s beans, and you know who you are, would probably be wise to keep a close eye on the $11.63 level in the January futures.  If we break through that I would not be surprised to see the market head down to the Fibonacci support at $11.17 and if it got there would also look for it to drop to $11.09 (red line) to fill the gap left in September of 2010.

WHEAT: 7 higher

The drought in Texas doesnt show any signs of letting up.  The drought in the Ukraine also shows no sign of letting up although other parched portions of Europe have gotten good rains.  An interesting story that may be slowly unfolding is in SRW country where planting is running well behind expected levels.  It appears as if planted acres could be as much as a million acres less than expected.  The question then becomes, will these acres eventually end up in corn next spring?  Yesterday wheat once again seemed to take its price direction cue from the corn market.  I continue to look for wheat to roughly mimic the price direction of corn with the Minneapolis futures seemingly the strongest of the three wheat futures markets. 

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.