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Grains End Week on Rollercoaster Trade

October 12, 2012

The grain markets had plenty of fresh news to digest late in the week after trading very narrowly for the first three days. The late-week rollercoaster began following the USDA’s latest update of production a well as U.S. and global supply and demand updates.

The release of the fresh data lead to sharp gains across the grain floor, with the corn market leading the way with near limit gains as prices traded to the highest levels in nearly four weeks. The sharp gains on Thursday could be more about what the trade did not see in the updated figures rather than what they did see.

The nearly $3 collapse in the soybean market from the summer highs was largely based on better than expected yields across the belt as the combines began to roll. The fear of a nearly 300 million bushel gain in soybean production had that market on the defensive right up the 7:30 a.m. release of USDA's fresh data. The soybean market then rallied nearly $.30, not because the figures were "bullish", but rather that they had seemed to avoid the sharp increase in production that many had feared.

The soybean market then reversed its strong trade on Friday with a $.26 loss. However, long term support in soybeans should come in the form of strong demand from China, which has lead to an explosive sales pace to date. The enthusiasm for soybeans to trade to the lofty summer projections of $18-$19 are now on hold. There is definitely a rationing job to be done in the soybean market.

Good support should be found in nearby soybeans near $14.80 and rallies to $16-$17 are likely as that process plays out. It seems now that a disruption in the South American growing season will now have to occur to reach much beyond that.


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