Weak export sales reduced the early optimism in grains.  December corn and December wheat contracts were hit hardest with heavy bearspreading across the board.  Wheat has finished higher for 7 consecutive trading sessions and was "due" for a corrective trading session.

Still wheat remains well above the low end of its range as the drought continues to threaten winter wheat crops.  We will have our next crop ratings report on Monday but we have had a month of record-low ratings during November.  The outcome of these low ratings is still unclear as springtime weather is still paramount but the market agrees that it certainly can’t be good for production.

Weekly Export Sales

Sales were well below the average of estimates and the market had a hard time holding support for the rest of the day.

                                      Estimated Range                             Actual

Corn:                           400,000 – 650,000 MTs                      263,500 MTs

Soybeans:                   500,000 – 700,000 MTs                      319,100 MTs

Wheat:                        300,000 – 500,000 MTs                      279,300 MTs

Soyoil:                         100,000 – 150,000 MTS                     121,500 MTs

SoyMeal:                     100,000 – 250,000 MTs                      365,100 MTs

Wheat and corn are both suspended in the same situation… they can’t overextend pricewise as they still need to compete in the world market.  The market has already priced in the Argentine weather problems and the poor winter wheat crop conditions, now it is up to demand to keep the rally going.  India has approved 2.5 million MTs for export and more may be on the way to weigh on world prices.

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CBOT markets closed sharply higher with Kansas City Wheat leading the way.  December KC Wheat closed 31 ½ cents higher at $9.15 ¾.  Clearly the market is concerned with the record low winter wheat crop conditions that continue to decline on the weekly crop progress reports.  Overly dry conditions are still forecasted in HRW country. 

There is a lot of speculation over how drastic yields will be hurt by the early low crop ratings this year.  There is still plenty of time between now and harvest which could help or hurt final production before it is all said and done. Either way the uncertainty of record low ratings in November can’t be good and may keep wheat prices supported. We have bounced off the low end of the range again and it looks strong technically.

December KC Wheat

The other weather market supporting grain prices is in Argentina.  Wet weather has slowed planting progress for corn and raised quality concerns for wheat.  Currently the USDA has Argentine corn production estimated to be 28 MMTs compared to 21 last year.  Argentine corn is behind planting pace at just 50% complete.

We will continue to watch the 8am USDA sale announcements and Thursday export sales reports for direction, especially for soybeans.  Today was the first day we haven’t seen soyoil sales in a while but the recent pickup in export demand has helped the price rally.  Domestic fundamental news will likely be slow for the next 45 days and may keep prices wandering with the outside markets.  If you would like to receive our expanded commentary including hedge recommendations, morning highlights, and/or morning automated call please sign up using the link below.

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CBOT markets closed modestly higher to start the week.  December corn was up 1 ¾ cents at $7.47 ¼, January soybeans up 6 cents at $14.24 ¾, and December wheat up 1 ¼ at $8.49.

The morning session was strong especially after the USDA announced another sale of 20,000 MTs of US soybean oil to "unknown".  Grains lost much of their early gains as the day progressed on the lack of strength in the outside markets as well as lackluster Export Inspections report.  The market was estimating 60-70 million bushels for export and the actual was 45.49.  Wheat missed expectations at 7.83 million bushels but corn came in line with estimates at 15.92 million.

Kansas City Wheat was strong for most of the day largely due to weather concerns.  Winter wheat has had the lowest crop rating during the month of November for the past 3 weeks in a row.  Today the good-excellent rating fell another point and is now at 33%!

December KC Wheat

Southern Brazil is still dry but added some precipitation on the midday forecast for this weekend. Argentina still looks too wet in the 7 day model but may have some drier conditions in the 7-14 day period.  Hard Red Wheat country is still looking at overall dry conditions for the next 14 days which may provide support especially after another decline in crop ratings.

We will continue to watch the 8am USDA sale announcements and Thursday export sales reports for direction, especially for soybeans.  Domestic fundamental news will likely be slow for the next 45 days and may keep prices wandering with the outside markets.  If you would like to receive our expanded commentary including hedge recommendations, morning highlights, and/or morning automated call please sign up using the link below.

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CBOT markets were strong Tuesday on low volume trading.  The market traditionally sees price support around Thanksgiving Day and we can attribute much of this strength to seasonal factors.  Reports of stronger crush margins in China kept the January contract supported.  South Brazilian weather had increased rains expected for Thursday into Saturday and remains favorable overall. There weren’t any fresh crop threatening weather problems in the midday forecast for South America.  

US HRW country is still looking dry for the next two weeks!  Yesterday the Crop Progress Report showed a decline in winter wheat conditions to 34% good-excellent.  This is a new record low crop rating during the month of November.  Even with this "price-friendly" news wheat had the least amount of support on the board.  There is plenty of world competition among exporting countries and the US has not been the cheapest option.  We are at the bottom end of the range for December Chicago Wheat and may be ready for a technical bounce.

Crude oil lost much of its recent price rally today after talk that a truce between Israel and Gaza is close to being reached.  January crude oil was down $2.00 near the end of the electronic trading session.  The weakness in energy prices provided some resistance for the corn market.

Corn was unable to close above the 50 day moving average currently at $7.45 ¾.

January soybean’s upside target may be up at the gap level of $14.50 and then $14.55 for the 200 day moving average.

It will be a full trading session tomorrow but markets will be closed on Thursday.  Friday’s hours will be shortened to a half-day.

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Grains were stronger Monday after favorable news out of China as well as strong US equity and energy markets.  December corn closed 11 ¾ cents higher at $7.38 ¾, December wheat up 3 ¾ cents at $8.41 ¾, and January soybeans up 11 ½ cents at $13.94 ¾.

The CNGOIC announced the temporary halt of Chinese soybean reserve sales.  Year-to-date the Chinese government has sold roughly 3.7 million mts of soybeans.  They will stockpile soybeans again on new crop supply.  Chinese equities were also higher after touching 3 year lows.

On Friday the EPA announced that they would not be waiving the RFS ethanol mandates which has contributed to some of the recent corn strength.  We are hearing talk of renewed world interest in US corn as well.

Winter wheat prices have been relatively weak lately but we continue to see declining crop conditions.  Last week we saw a record low good-excellent level for November at just 36%.  Today’s report showed another drop this time 2% down to 34% good to excellent.  Here is a chart of front month December wheat:

Traditionally this holiday week can be strong for soybeans and since we are only 1 trading day off the recent lows we may be "due" for a supportive correction.  Export inspections were strong for soybeans again at 61.992 million bushels.  South American weather remains favorable for production and will be the main fundamental providing resistance.

Not surprisingly we saw a major shift in grain positions by the managed money on last week’s Commitment of Traders report. They liquidated 23,962 longs and added 8,622 shorts of corn making a total net long drop of 32,584 contracts (using futures and options)!  For soybeans they liquidated 26,047 long contracts and added 12,632 shorts for a 38,679 contract decline!  This basically proves what we already know, the massive positions have been liquidating AND getting short and prices have come down.  We want to remain adequately hedged in the cash market and keep our upside in calls.

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Grains were mixed Wednesday with soybeans sharply higher and wheat lower. January soybeans made their high for the trading session at 2:00am last night which was mostly related to the Dalian markets.  Chinese soybean futures rallied sharply overnight and Malaysian palm oil futures were sharply higher.

This morning’s news was also positive for soybean prices.  NOPA crush was 9 million bushels more than the average guess.  We also saw a USDA sale announcement of 120,000 MTs of US soybeans to China and 40,000 MTs of US soyoil to "unknown".  At a time when we still need to see demand rationing this news was supportive.  Even with the supportive fundamental news we weren’t able to touch the overnight highs for January soybeans.  One thing I wanted to discuss is the massive volume change that we still see at the 9:30am session open.  A lot of computer based trading systems still appear to be waiting until that time before trading despite the 21 hour market availability.  It is also important to note that the majority of the recent weakness and large sell orders have come during this opening timeframe after supportive overnight markets which come on low volume.  See chart:

The other topic that is hogging the headlines is the fiscal cliff.  We have very quietly lost over 700 points on the Dow Jones since Election Day.  The government does not have a solution to the Fiscal Cliff yet and the market is selling off in anticipation.  This could be the next downside risk to watch out for in the ag markets is spillover selling.  If we break $7.05 in the December corn contract watch out for the gap fill at $6.76 to be the next technical target.  With that said we have just had a two day bounce off the oversold levels which is short term positive on the stochastics.

Dow Jones

Dec Corn

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CBOT markets had a choppy two sided trading session with December corn and November soybeans leading the way higher.  The November-January soybean spread was up 13 cents today closing at +19 cents!  This front month strength helped January soybeans close 3 cents higher but the back month contracts all closed lower.  December corn closed 5 ½ cents higher while December 2013 corn closed 1 cent lower.

January soybeans traded all the way down to $13.91 ¼ before finding support.  That’s over a $1 from the pre-report price.  The USDA’s higher production estimate certainly had the biggest downside influence but we are also contending with the recent slowdown in export demand. Until we see crush margins improve in China the bulls may be a little hesitant to jump back into the market.  We did see a strong export inspections report for soybeans this morning.  Expectations were calling for 56 million bushels and soybeans came in at 64.0!  For this season we have exported approx 120 million bushels of soybeans more than we did at this time last year.  Corn and wheat inspections were below estimates.  Friday morning we will get export sales data which is still a major indicator for direction. 

Tomorrow morning we will see OCT NOPA CRUSH estimates released at 7:30 am.  The average guess is 147.713 million bushels with a wide range of trade estimates from 138 – 153.  The September crush was 119.732 million bushels and October of last year was 141.179 million.  Oil stocks are guessed at 2.090.  We will have this report in the morning letter and automated phone call.

South American weather looks favorable on today’s morning and midday forecasts. 

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Chart: Dec Corn (next gap fill at $6.76)

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Follow through selling from Friday’s report left grains sharply lower.  December corn was down 20 ¾ cents at settlement closing at $7.18.  January soybeans closed 46 ¼ cents lower at $14.05 and December wheat down 28 ¾ cents at $8.57 ¾.

January soybeans started out with a gap opening trade below the 200 day moving average on Sunday night’s session.  With favorable weather in South America and reduced fear of US soybean production the market was quick to liquidate more longs.  Fears over the fiscal cliff continue to flood the headlines but we really didn’t see much weakness in the equities. There were also rumors of Chinese soybean cancellations but no confirmations.

The USDA reports will all be delayed 1 day this week due to the holiday (besides Cattle-on-Feed on Friday).  This means we won’t get crop conditions for winter wheat until tomorrow afternoon and export inspections will be tomorrow morning.  Without a whole lot of fresh fundamental news Monday the market was heavily influenced by some bear technical signals and Friday’s follow through sell pressure.

December corn’s 50 day moving average crossed below the 100 day for the first time since July 9^th suggesting a change of trend.  Volume was very strong Friday and today for Dec corn.

Jan beans gapped below the 200 day moving average on strong volume today.

WASDE REPORT SUMMARY:

The market was pricing in higher yields for soybeans but the USDA increased production above even the highest estimate.  Total soybean production came in at 2.971 billion bushels when the average guess was 2.891.  Total corn production was estimated at 10.725 billion bushels when the average guess was 10.629.

Most of the extra soybean production was immediately attributed to higher export sales estimates as it should be with our current export sales pace.  The ending carryout for US soybeans is now estimated at 140 million bushels.  This is still a very tight carryout situation when looking at 3.021 billion bushels in use this year.

The world corn and soybean carryouts were both higher than the October estimates.  World production outside of the United States was unchanged besides a slight decline in EU Wheat.

With the extra corn and soybean production the US supply and demand tables are a little more flexible.  Soybean export demand still remains strong and the world stocks to use level for corn is still extremely tight.  We have to continue to watch for changes in demand most notably exports.  January is still going to be the major time period for reports and market direction when we get an actual count of stocks.

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USDA REPORT AND ESTIMATES:

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It was a weak day at the Chicago Board of Trade after a bearish USDA report.  December corn closed 2 ½ cents lower at $7.38 ¾, January soybeans closed 44 ½ cents lower at $14.51 ¼, and December Chicago wheat down 16 cents at $8.86 ½.

At 7:30 this morning the USDA released its monthly WASDE report with updated production estimates for corn and soybeans.  The market was pricing in higher yields for soybeans but the USDA increased production above even the highest estimate.  Total soybean production came in at 2.971 billion bushels when the average guess was 2.891.  Total corn production was estimated at 10.725 billion bushels when the average guess was 10.629.

Most of the extra soybean production was immediately attributed to higher export sales estimates as it should be with our current export sales pace.  The ending carryout for US soybeans is now estimated at 140 million bushels.  This is still a very tight carryout situation when looking at 3.021 billion bushels in use this year.  January soybeans settled just above the 200 day moving average which means we filled the long term gap going back to the 4^th July.

The world corn and soybean carryouts were both higher than the October estimates.  World production outside of the United States was unchanged besides a slight decline in EU Wheat.

Where do we go from here?  With the extra corn and soybean production the US supply and demand tables are a little more flexible.  We still believe the downside potential is limited as long as we don’t see a major outside market influence such as simultaneous declining energy and equity markets.  Soybean export demand still remains strong and the world stocks to use level for corn is still extremely tight. 

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USDA REPORT AND ESTIMATES:

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 CBOT markets were mixed Thursday as traders wait for the WASDE report Friday morning.  December corn closed 3 cents lower at $7.41 ¼, January soybeans 11 ¼ cents lower at $14.95 ¾, and December wheat 8 ½ cents at $9.02 ½.

It was another liquidation day for the outside markets following Tuesday’s election results.  Treasuries were sharply higher and equities sharply lower on ‘flight-to-quality’ trading.

Poor soybean export sales this morning kept a weaker bias in the market most evidently during the closing minutes of the day session.  Corn has been rather range bound for over a month now and without significant changes to the estimates tomorrow we expect it to stay that way.  Export demand has been very slow but interior basis levels remain above average.  Wednesday’s EIA report showed an increase in ethanol production along with a sharp decline in ethanol stocks.  Although this was short term positive for corn, we don’t see that side of the demand equation increasing unless we see a sharp rally in energy prices.  We think 4.5 billion bushels will be a solid demand number for ethanol production.

The average guess of the polled analysts puts soybean production at 2.892 billion bushels.  This is up 32 million from the October WASDE report and there is a 260 million bushel difference between the high/low guesses.  Most analysts believe that the increased production will be offset by an increase in exports which I do as well.  Today we got the first glimpse of lower export sales.  Price action will still be very sensitive to any additional soybean demand as well as any weather problems in South America.  Today’s forecast is mostly favorable for Brazil and Argentina, we will update with any changes.

US wheat prices have started to become more competitive in the world market.  HRW dry weather is still a concern but favorable rains are expected in wheat country late next week.  Friday’s USDA report should give the market a little more direction in the wheat market.  If it is a bullish wheat report it will get interesting technically because we settled just below the trendline resistance for the December wheat contract (see chart).

Wheat Chart

Soybeans settled below $15.00 and looks poised to try to fill the gap made on the 4^th of July which is $14.74 ¼.  Tomorrow’s report will have the most impact on price so watch the 7:30 am market reaction. 

Soybean Chart

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Corn and wheat were higher while soybeans closed lower. December Chicago Wheat led the way settling 17 cents higher at $8.94.  December corn closed 3 ¼ cents higher at $7.44 ¼ and January soybeans 8 ½ cents lower at $15.07.

Now that the election is over the markets are readjusting for the outcome.  Equities were hit hard today with the Dow Jones trading as much as 350 points lower on the day.  Crude oil was trading 4.50 lower on the day at one point!  Grains detached themselves from the outsides and started the day rallying off the lows.

Ethanol production was higher and ethanol stocks were down much more than expected.  This was positive for corn prices and added to the support.  With the report out on Friday we aren’t expecting any major position changes on Thursday besides the DB and Goldman Rolls.

US wheat prices have become more competitive in the world market as supply concerns are mounting. Wheat was the strongest grain contract today and has helped corn prices stay afloat. Friday’s USDA report should give the market a little more direction in the wheat market.  Next wheat resistance level for December is $9.09.

Wheat chart

Corn bounced off its support level again.  We are still expecting corn to remain range bound for now.  The January reports will be the next major indicator for trend change when we get an actual count of supply.

Corn chart

Soybeans briefly broke the $15.00 level again early in the session.  The gap from the 4^th of July is at $14.74 ¼.  The market still may try to fill that level which I have indicated on the chart below.  The bulls are liquidating over concerns of higher production on Friday’s report.  In our opinion the demand is still strong enough to keep soybeans supported even with a national average yield of 38.7.

Soybean chart

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The liquidation continued from Friday with January soybeans closing 23 ½ cents lower.  December corn closed 4 cents lower at $7.35 ½ and December wheat was up 1 ½ cents at $8.66.

The market is taking risk off the table ahead of the election and over fears of higher production estimates on Friday’s Supply and Demand report.  FC Stone and Informa released their estimates at the end of last week and we have had two days of liquidation since.  We have included our own estimates in the charts below.  We will add the average market guess when the Reuters and Dow Jones release their analyst polls.

Corn closed below the 100 day moving average on Friday for the first time since June 18^th.  If we fall below the low of the range ($7.32 ¼ Dec) we could see further liquidation to take us back towards the late September lows. 

Soybeans started to fill the gap on the most recent lows in October but didn’t quite make it.  For January that level would be $14.74 ¼. If we break the $15.00 support level I would look for beans to try to fill that gap.

Crop Progress shows the wheat condition at 39% good-excellent which is down 1% from last week.  The next USDA report will come out on Friday, November 9^th.  If the USDA estimates fall in-line with these private estimates the extra supply may be enough to take us back to the recent lows.  If the USDA remains neutral I believe we will stay range-bound until we get to the January reports.  Domestic basis remains strong for corn and exports remain strong for soybeans.  To receive a free trial of our commentary including hedge recommendations please follow the link below.

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Corn and soybeans sold off heavily on Friday after higher production estimates were released from Informa and FC Stone.  December corn closed 11 ½ cents lower at $7.39 ½, January soybeans 33 ¼ cents lower $15.26 ¾, and December wheat down 4 cents at $8.64 ½.

Corn had a rather perfect storm of bearish news today to push us below the 100 day moving average for the first time since June 18^th 2012.  The Deutsche Bank roll started which consists of selling December 12 corn to buy December 13 corn.  That spread was down as much as 12 ¾ cents today.  We also had bearish private production estimates, poor weekly corn sales and very weak outside markets.

FC Stone released their estimates yesterday after the grain close.  Informa released theirs today at 10:30am.  Both estimates were considerably bearish and the market did not discount them.  I have included the new estimates below in comparison to last month and to the current USDA estimates.

Along with the estimates we also had very weak outside markets forcing liquidation in grains.  Crude oil was trading as much as 2.43 lower down to a low of $84.66.  Silver was $1.30 lower, Dow Jones over 150 points lower, and the US Dollar was sharply higher.  These are all signs of risk-off trading which is probably related to next week’s election uncertainty, especially after a favorable jobs report today.

Weekly export sales were delayed until this morning.  The results continue to flow in poor for corn, strong for soybeans, and as expected for wheat.

Technically this was a "bearish" close for corn.  This is the first time we have settled below the 100 day moving average since June 18^th (see chart)!

The next USDA report will come out on Friday, November 9^th.  If the USDA estimates fall in-line with these private estimates the extra supply may be enough to take us back to the recent lows.  If the USDA remains neutral I believe we will stay range-bound until we get to the January reports.  Domestic basis remains strong for corn and exports remain strong for soybeans.  To receive a free trial of our commentary including hedge recommendations please follow the link below.

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Grains closed mixed with heavy bear-spreading in corn.  December corn closed 4 ¾ cents lower at $7.51 while December 2013 closed 3 cents higher.  This may be in anticipation of the Deutsche Bank roll which begins tomorrow.  January soybeans closed 11 ¼ cents higher at $15.60 and December wheat 4 cents higher at $8.68 ½.

It was the first day of the month and we had money flowing back into soybeans again.  May soybeans had the strongest close but they are still at a 65 cent discount to January!  Strength was partly attributed to strong economic data out of China and sharply higher outside markets in the US.  Corn’s support tailored off as we progressed towards the close.

Wheat’s crop rating was below market estimates but didn’t seem to overly support wheat.  Even after the midday forecast showed a significant precipitation decrease in Hard Red Wheat Country the market still came off its highs.  Nebraska to eastern Kansas and Oklahoma had forecasted 1-2 inches of rain previously and now is looking at a range of 0.10-0.50 inches.  The market continues to gravitate and hold near its 50 day moving average which is currently $9.04 ¼ for December KC wheat.

After the market closed FC Stone released its crop production estimates. They are expecting corn yield to be 124 bpa and production at 10.881 billion bushels.  The USDA is currently at 122 bpa and 10.706 bill bu.  FC’s bean yield is 39.1 compared to the USDA’s 37.8.  They have production pegged at 2.959 compared to the USDA’s 2.860.  An increase of 100 million bushels of soybeans and 175 million bushels of corn would certainly loosen up the tight balance sheets.  We just have to see how seriously the markets take these estimates over the next 24 hours.  We also will get Informa’s estimates tomorrow around 10:30 am.

The storm delayed the weekly export sales and they will be released tomorrow at 7:30 am CST. Estimates for the report:

Corn                                       110,000 – 400,000 MTs

Soybeans                               500,000 – 700,000 MTs

Wheat                                     300,000 – 600,000 MTs

The average price for October corn was $7.50 and November soybeans was $15.39.  Now that the Harvest Price for crop insurance can no longer fluctuate it is important to re-evaluate where your marketing plan stands for downside price coverage.

December Corn

Corn found technical resistance at its 50 day moving average.  Look for next support at the 100 day moving average at $7.43 ¼.  The 100-day has been technical support over the past 3 trading sessions.

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