EHedger Afternoon Grain Commentary 10/2/12
Oct 02, 2012
December corn was once again the lone contract to finish higher while beans and wheat had double digit losses. December corn closed 1 ½ cents higher at $7.58 ¼, November soybeans down 29 ¾ cents at $15.30 ½, and December wheat 12 ¾ cents lower at $8.71 ½.
The November soybean contract is now 70 ½ cents lower for the week. The expectation for higher soybean acres, higher yield, and typical harvest pressure continues to weigh on prices. Yield reports seem to be coming in better than expected but overall have been hard to quantify. What the USDA writes down for their October 11th estimate is any ones guess. But let’s assume that the USDA does increase available bushels by 200 million (increased old crop stocks, increased acres, increased national average yield). Over the past 5 months we have cut 616 million bushels off the original 2012/13 demand estimates. With the buying pace China has set we could easily replace 1/3rd of that lost demand with those extra 200 million bushels. Though I want to stay hedged, I find it hard to believe that the price of soybeans can continue falling at its current rate unless bean yields are substantially higher than the current expectations. Soybeans are now 41% harvested and the good-excellent rating was left unchanged from last week.
After the market closed FC Stone released their production estimates. They raised their bean estimate to 2.849 billion bushels which is 215 million more than the most recent USDA estimate in September. They raised the national average bean yield to 38.2 bpa. The firm is estimating total corn production at 10.824 billion bushels (97 million more than Sept USDA est) and have average yield pegged at 123.9 bpa.
Corn has a really bullish supply story, but is the demand going to pick up? Last week the USDA shocked the market with an old crop corn carryout less than a billion bushels. In response we had a limit up settlement and an overall supportive tone this week. Corn is now 54% harvested and the good-excellent crop rating went up 1% to 25%. Now that we are past the 50% harvested mark this may be a trigger point for market participants to start looking for a harvest low. We just need to start seeing export demand pick up for any sustainable rallies. Last week we had a dismal 400 MTs… total! We need to watch the Thursday sales reports for direction as well as the next WASDE report which will be released on October 11th.
Soybean Technicals: The November contract found support today at its 100-day moving average of $15.26 ¾ (blue line on chart). The next targets to find support below this level would be the 50% retracement level at $15.17 and then at the 4th of July gap fill which is $14.78. Keep in mind we are approaching oversold levels.
Corn Technicals: Corn was unable to make it down to the critical 50% retracement level, gap fill, or 100 day moving average before its late rally last week. We now have the MACD and exponential oscillator turning higher which may be an indicator of another rally to come.
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