September 8, 2011
By: Craig Haugaard, Grain Origination Manager
CORN: 3 lower
We tossed a pretty good pile of positive news at this market yesterday and couldn’t manage to close in positive territory for the day. We were working off of a crop conditions report that was the worst in many years. We had crude oil stage a rally which normally would pull corn with it. We had Cropcast toss out their opinion that the production this year would come in at 11.9 billion which would give us a negative carry-out if the rest of the USDA assumptions are held unchanged. With that background why isn’t every trader on the face of the earth rushing to buy corn? I mean, if we are going to run out of corn then buying at this level is a great deal, right? Well, perhaps there is a little bit of negative news out there as well. While we have been focused on the crop within our borders other farmers around the world have been producing feed grains as well. It now appears as if the Ukraine may export up to 12 MMT of corn, well ahead of the 8.5 MMT that the USDA has them factored in for. We have previously talked about the thought that corn production will be higher in South America this year. Finally, the feed wheat story just won’t die with cheap wheat from the Black Sea competing with corn and more recently feed wheat from Australia being offered to Asian markets at a price that is $65 MT cheaper than what corn from the Pacific Northwest (USA) is being offered at. Having hit our Fibonacci retracement number pretty much dead on it may well be that the trade is willing to chop around up here until they get a clearer picture of what actual production numbers look like. From a historical standpoint it is rare to rally into harvest and of course we are already higher than we have ever been before this time of year so the psychology of this could get very interesting. Unless we get a real game changer of a number on the 12th I suspect there will be a tendency to chop around or trade lower. As noted yesterday all of my technical indicators are bearish so if you are following those you would have made a sale yesterday morning and probably would be feeling pretty good about it this morning.
SOYBEANS: 8 lower
Yesterday Cropcast tossed out a production number of 2924 with a national average yield of 40.3 bu/acre. That coupled with the reduction in crop conditions from Tuesday’s USDA report should have been enough to take this market higher but it wasn’t. Right now, with two of my three indicators having turned bearish this market just seems tired. We hit the Fibonacci retracement number on the upside pretty much dead on and perhaps the path of least resistance will be lower for awhile. We have Fibonacci support at $13.96 in the November futures with resistance at $14.65. Of course a surprise in the USDA report next week could change everything.
WHEAT: 7 lower
Right now it seems as if the sword of Damocles hanging over this market is the expectation that the USDA report next week will show an increase in world wide wheat stocks. That weighed on this market yesterday as did news of beneficial rains in Australia and increased supply estimates coming out of Canada. Couple that with a softer corn market and wheat never had a chance yesterday. With the overnight trade all three of my technical indicators have now turned bearish for both HRW and HRS. If you are sitting on some that you need to move ahead of fall harvest this turn of events should give you pause and perhaps even trigger a sale.
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.