September 2, 2011
By: Craig Haugaard, Grain Origination Manager

CORN: 5 higher

We saw rampant profit taking during yesterday’s session as funds were sellers of 18,000 contracts during the session.  As best I can determine the sell off was started when a trader, let’s call him Mr. X, received a call at about 11:50 yesterday from his wife who informed him that she had booked a flight to Paris for the week-end to do some shopping so he better bring home a bunch of cash.  Mr. X decided to liquidate part of his long position in corn since he had made what trained economists call a “crap load” of money being long the market lately.  I also have it on good authority that he decided that if Mrs. X was going shopping in Paris he was going to take a couple buddies to Las Vegas for the week-end and thus liquidated a few more contracts.  Since Mr. X is a respected trader, when other traders saw him selling they followed suit and the sell off was underway.  OK, I made almost all of that up but the fact remains that the only explanation that was given for the sell-off yesterday was profit taking so at least my story falls in line with that and was marginally more entertaining.  The real exciting news yesterday came out after the market had closed.  That is when FC Stone released their report which placed the national average yield at 146.3 bu/acre and total production at 12350.  Since the USDA projected production number in August was 12914 the implications of this could be kind of gihugic.  Let’s play the game that we have been playing lately, namely leaving the rest of the USDA assumptions unchanged and plugging in the FC Stone production numbers.  We would get the following results.  

I can’t picture any scenario in which the trade allows the carry-out to get to 150 so, if the FC Stone report is correct, that would almost have to mean that this market needs to go higher to ration demand.  After the recent setback in which we approached the first minor support level I would expect this news to push the market higher although the reaction today may be muted in the face of a long week-end.  I should also mention that the Informa report, which is much more widely followed than FC Stone, will be released next week.  If we see FC Stone type numbers in the Informa report it could be explosive.

SOYBEANS: 5 higher

Profit taking was the feature of the day in the soybean pit as well.  After the close the FC Stone projections came out with a national average yield of 41.05 bu/acre and a total production of 3030.  This is a production number that is down 26 from what the USDA had in their most recent August report and if we leave the rest of the USDA numbers unchanged it would project a carry-out of 129 million bushels.  This would drop the stocks to use ratio to 4.1% which in turn should shore up support for this market.
In spite of yesterday’s sell-off two thirds of my technical indicators are bullish and for now that $14.60 level looks like it will offer stiff resistance with support around $14.10.

WHEAT: 7 higher

Rumors that feed wheat from Canada is being sold all the way down to Texas helped to solidify the idea that wheat right now is in large part a feed grain.  This linkage which is also supported by cheap Black Sea what that competes very well in the world feed grain market caused the wheat market to succumb to the pressure from the corn market and trade lower for the day as well.  Of course, being n old chart nerd, I would argue that the fact that we hit the retracement numbers pretty much dead on is reason enough to sell the market and look for a place to hook back up from the long side after a suitable setback.  In view of the FC Stone reports maybe we have had our setback but if it drops some more look for solid support in the Kansas City December futures around the $8.58 level.  

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.