September 16, 2011
By: Craig Haugaard, Grain Origination Manager
CORN: 4 higher
Sometimes in life you run into things that just make you shake your head. Yesterday I went into a fast food place to grab lunch. The young lady behind the counter took my order and then looked right at me and said, “That will be $7.63, please pull ahead.” I just looked at her and finally said, “Do you want me to step closer to the counter?” I walked away from that experience thinking that folks keep telling us that young people are our future. Yeah, that is going to work out great. Anyway, I suppose you could argue that the markets are as confused as that young lady was yesterday. We broke hard when the frost damage turned out to not be as wide spread as the trade had feared. That initially pushed the market lower and took it low enough to trigger technical sell signals which soon had what felt like everyone piling on. When the smoke cleared for the session the funds had liquidated 17,000 contracts. We closed December corn sharply lower but did manage to close above $7.00 which is very important. After the close we had a very interesting report that should keep confusion king of the corn pit for awhile longer. The FSA released their enrolled acreage numbers. It is important to note that this does not cover all acres but is significant. In corn the FSA report has acres at 88.6 million, down from the USDA September number of 92.3 million acres. The past two year the FSA number has ended up being 2.6 and 2.9 million less than the final USDA number so if we assume that is the case again this year that would project the final USDA number to be between 91.2 and 91.5. In other words if history repeats itself we could see corn acres down as much as 1.1 million from wheat the USDA is currently using. This in turn would knock about 150 million bushels out of production and take the carry-out number to the 520 area, all else being equal. I suspect that is why the market was a little higher in the overnight trade. We will now see if this report has an impact today or if the trade just shrugs it off. From the technical side of the equation I told you on September 6 that all of my indicators had turned bearish and “I have to believe that selling something at this level is not the worst plan in the world.” Since I know you all listened to that advice I imagine you are all sitting in great shape right now but if not please keep a very sharp eye on the December chart. Right now, as you can see on the following chart, we are against a support point. If we get a close below $7.00 we would not have another significant support point until the $6.55 area.
SOYBEANS: 6 higher
Slow exports, particularly to China, coupled with a less wide spread frost than originally feared brought selling pressure to this market yesterday. For the session the funds were net sellers of 8,000 contracts as the market sunk down toward that $13.53 support level that we talked about in this space yesterday. We only missed hitting that level by three cents so hopefully that will be enough. The $13.53 level signals a full Fibonacci retracement of the last up move is support here is significant to prevent this market from turning into a bear market. After the close we had the FSA report pegs enrolled acres at 73.5 million. You will recall that the last USDA number was 75 million. The past two years the FSA number on average has been 1.1 million less than the final USDA number. If that holds true to form again this year that would project a final USDA number of 74.6 million. Extrapolating that out it would reduce the total production by about 17 million bushels and drop the projected carry-out to 148 million. All in all this is probably somewhat supportive and again is why the overnight trade was a little higher. Technically, all of my indicators are bearish and we need the $13.53 level to hold. A close below that could signal a move to $12.82 in the November futures.
A slow export pace and the drag from the corn market pulled wheat lower yesterday although late in the session it recovered nicely. This was probably due in large part to traders unwinding their wheat/corn spreads. The FSA numbers had all wheat at 51.5, well down fromth4e USDA’s 55.2 September estimate. In the past two years we have seen the FSDA numbers come in 2 and 2.8 million acres less than the USDA number. If that holds true to form once again this year one would look for the final USDA number to be in the 53.5 to 54.3 million acre range. The thought that wheat acres could be as much as 1.7 million less than the current USDA number should be supportive to this market. Having said that, my technical indicators continue to be bearish although, as you can see on the following chart, the Minneapolis December futures should have solid support at the $8.43 level so perhaps we can get a bounce up from there.
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.