While stocks bleed, funds flow to soybeans; sales boost corn

February 3, 2014 05:57 PM
Grain & Oilseeds Report

Corn: Another overnight sale of corn helped to keep solid support in this market again Monday. There were 113,780 tonnes of corn sold to “unknown.” Once again, this is a small sale, but we have seen a string of these put together recently, and they are starting to add up.

Both 435 1/2 and 436 resistance was taken out by overnight traders. What took thousands of contracts to buy up close to those resistance levels was taken out on relatively small buying overnight. Of the three close resistance levels that corn sellers are watching, the next and most important one is 440 3/4. Early on in the session corn pressed somewhat close to that level but did not pressure that resistance yet.

Looking forward, the bulls will want to see these daily sales continue and also see another strong weekly sales report on Thursday. If corn bulls can take out 440 ¾, it will start to make this chart look like a rounded out bottom. It is much too early to make the case for corn to be bottoming this early in the year but it is worth knowing. Bears will look for 440 3/4 resistance to hold giving another point to sell from as well as now deserving a technical setback. If corn sees a technical correction, then a drop to the low 420′s might not be possible but some type of pullback can be expected.

It remains that bulls have fundamentals while bears have chart levels to sell from. Let’s see if Tuesday offers even more overnight sales for the bulls to work from. At this point, no news at all might even be a sell point for the bears…Ryan Ettner

Soybeans: After a rather quiet overnight session, the soy complex caught a bid when the pit opened and never looked back. At one time, the March contracted tested the $13.00 resistance level but was not able to take it out. New information to trade was limited, so the size of the move was a surprise.

The stock market was hammered as the Dow futures dropped over 300 points today. A disappointing ISM number was the impetus for the selloff. Some in the trade are speculating that some of the money that was in the equity complex is leaving and is working it’s was back into commodities. Time will tell if this thinking is correct but it was estimated that funds were buyers of 7500 beans and 3500 meal contracts.

Export inspections came in at 45.435 million bushels today, which was lower than anticipated. With the bitterly cold weather that the U.S. saw last week, it was hard to move beans down river, so it should not have been a surprise that shipments were down compared to the previous week.

The bean basis in the gulf was down another 5 cents today being quoted at 85 over the March. Just a few weeks ago the basis was 140 over the March so the selloff continues. With Brazil harvest picking up steam, demand is shifting away from the United States, and that is the reason for the selloff. The weaker basis makes it all the more likely that the much-anticipated China bean cancellations are near.

Weather in South America looks good overall, with rain in Argentina and Southern Brazil helping out the late season beans. Dry weather in northern Brazil allows for a brisk harvest of the early beans. The cold, snowy weather that the U.S. is seeing is providing support for the nearby contract as it is keeping producers for moving grain to market. As the weather breaks, we would look for cash grain movement to pick up.

Allendale’s pricing model suggest that soybean prices could actually hold current values into spring. By the start of May, oilseeds should start a serious downtrend. We are projecting that with “normal” weather this summer, we could trade down to $9.25 basis the November contract…Jim McCormick

Wheat: Wheat finished the day higher as we watched it move above the downtrend line we have been in for the last three months. The longer-term trendline comes in slightly above the $6 area for the March contract, which we could see tested as we move closer to the wheat crop emerging from the ground and continuing the second portion of the growing season without much moisture in the plains and after several cold snaps that could have damaged portions of the wheat crop.

The general commodity index has been rallying recently which could also be leading to some general buying strength across the wheat complex. We are not going to suggest buying wheat, but at this time anyone holding shorts should start to look at lightening their position with a sell stop below the 550 area in the March Chicago contract.

About the Author

Ryan Ettner is a registered commodities broker and grains analyst at Allendale, Inc. Steve Georgy is a Sr. Broker/Manager at Allendale, Inc. Jim McCormick is Senior Broker/Manager at Allendale, Inc. Allendale is registered with the CFTC and NFA and is a member of the NIBA. www.allendale-inc.com