Joseph Vaclavik is the president at Standard Grain in Chicago. Standard Grain provides futures and options brokerage to farms, feedlots, elevators, processors, end-users and traders. Visit www.standardgrain.com for more information.
Monday Morning Grain Market Update
Oct 22, 2012
The grain markets are higher this morning, led by soybeans. The bean market continues its short-covering bounce this morning after a brief pause on Friday. The November bean chart is just coming off of severely oversold levels while traders contemplate the balance between rampant Chinese demand and larger US production. Many analysts are penciling in high number for Brazilian bean production as weather there has been mostly cooperative during planting season. Still, we know through our own experience in 2012 that a crop is not "made" until it’s in the bin. The corn market is near the upper end of what has been a wide trading range. The December contract would need to see a close above the 50 day moving average at $7.73 ½ before any new technical buying would occur. Both corn exports and the ethanol grind have been soft while demand for feed remains in question. Many traders believe that "the price is right" in the corn market for the time being. Wheat futures gave back most of the gain seen early on Friday later that afternoon; Ukraine’s announcement that it would ban exports beginning on November 15th was enough to push the sharply higher for only a brief period of time. The market is trading marginally higher this morning.
The USDA will release their crop progress report this afternoon at 3:00pm CST. Corn harvest is expected near 90-95% complete. Soybean harvest is expected at 80-85% complete. The CFTC released their Commitment of Traders report on Friday afternoon. Managed money sold 4k corn and are now long 256k. The same group of traders sold 10k soybeans and 3k wheat; the now sit long 167k and 45k, respectively. Fund liquidation has been a fairly consistent trend since early September.
The USDA released the Cattle on Feed report on Friday. Cattle on Feed was seen at 97% vs. the average trade estimate of 97.8%. Placements were seen at 81% vs. trade estimates of 85%. Marketings were seen at 88% vs. the average trade guess of 90%. The report was considered mostly bullish for the cattle market and as a possible negative for the corn market.
Outside markets are mostly positive for the grain markets this morning. Equities and crude oil are both marginally higher. The Euro is higher while bonds are lower. More third quarter earnings results are expected this week.
We believe that the soybean rally could extend further this week given technical momentum and short-covering. A close above major resistance in the $15.75 area in the November contract could see the move extend to the $16.00 area very quickly. The corn and wheat markets will have a tougher time rallying, as they remain mostly range bound.
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