July 29, 2011
By: Craig Haugaard, Grain Origination Manager

CORN: 6 lower

I have been trying to figure out how to tee this thing up this morning and have decided to go with a little piece of trivia.  The trivia is that the December corn futures are trading right now at the highest price they have ever been on this date.  Even in 2008 when we saw the December futures hit $7.99 ¼ in late June of that year, on July 28, 2008 we closed the December futures at $6.01 ¼.  I suppose the point is that we are enjoying a very unusual year and that if you sell anything at these levels today you would be making a sale at the highest level we have ever seen on this date in the history of the world.  Kind of cool.  The question then becomes, is there anything out there that could cause this party to end?  I think most of us have been around long enough to remember that markets can move both up and down.  As I look at the news that is dominating the attention of the traders today I am reaching the conclusion that the near term path of least resistance may be lower.  Here is what I am hearing bandied about this morning:

1) Cumulative export sales are running 8% behind last year with the USDA projecting that we will end up down 6% for the year.
2) The Deputy Ag Minister in Ukraine is saying their total crop could be 51 MMT. The USDA currently has them projected to be at 46 MMT.  The corn crop alone is projected to be 19 MMT, up from the 11.9 MMT produced last year.
3) It isn’t just Ukraine that has a larger crop as the EU and Russia also now appear to have crops that combined could be 13 MMT more than what the USDA is projecting.
4) From a world-wide perspective we are seeing a sharp increase in the feeding of wheat which is impacting corn demand.

None of this means that the bull is dead and we should be getting ready to blow taps over its body.  In fact the high night time temperatures are probably reducing the national average yield and harvest time may hold some surprises but let’s not fall into the trap of thinking this party is going to last forever.  In fact, given what the trade appears to be focusing on yesterday and today we could see corn work a little lower in the near term.  Technically, two of my three indicators are now bearish.

SOYBEANS: 6 lower

Thank you to those of you that played along with my name that tune contest.  I hope you are finding our new web site very user friendly.  As far as beans go yesterday the market was driven by disappointing weekly exports and the thought that the rains moving across the northern portion of the Corn Belt will be beneficial.  In all fairness to the exports I should note that for the year thus far we are running 3.4% ahead of last year with the USDA projecting that we will be up 1% for the year.  After getting a rally on Tuesday on the heels of a crop conditions report that showed the crop ratings deteriorating we have traded lower the past two sessions.  Given the current focus of the trade I would not be surprised if we flounder until Monday’s crop conditions report and then see another rally if, as expected, the report shows continued slippage in the crop ratings. 

Technically, as you can see on the following November futures chart, all three of my indicators are now bearish.

WHEAT: 2 lower

This market started out pretty good as reports coming out of the spring wheat tour are reported to be showing yields below those of last year.  That pop only lasted until the report of larger than expected crops in the EU, Ukraine and Russia came out and then the market was pressured into a lower close.  In spite of the lower close all three of my indicators are still bullish for both Minneapolis and Kansas City futures.

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.