It was a mixed day in the grain markets with heavy bear spreading. December corn closed 5 ¼ cents lower at $7.95 ½, December wheat down 5 ¾ at $8.75 ½, and November soybeans up 3 ½ cents at $17.22 ¼.
The morning session started with a sale announcement by the USDA for 110,000 MTs of US soybeans to China for 12/13 delivery. Typically any sign of additional demand during all-time record high prices would trigger more support but the pre-pit open was weak through the 8:30 am time frame. The November contract traded all the way down to $17.01 before finding support.
During the trading session, trading executives said that a branch of Taiwan’s Breakfast Soybean Procurement Association purchased 178,000 MTs of new crop soybeans for next year’s delivery. The amount from the US totaled 58,000 MTs for delivery in November while the other 120,000 was split between March and July in Brazil. This announcement may have been the reason we saw that extra strength come back into the bean market during the day session hours.
The University of Missouri put out a study by one of its think tank groups about ethanol production falling next year. They are estimating ethanol output to fall by 10% as the rising prices cut export demand by 50%. They only expect the domestic consumption to drop by 2%.
Friday’s Commitment of Traders report didn’t show any signs of the funds slowing down their purchasing. The ‘managed money’ is now net long 342,893 contracts of corn which is an increase of 39,715. They are also net long 252,388 contracts of soybeans, an increase of 21,845! At this point the information is over a week old given the lag in the reporting. We will have to see if they have continued this trend on Friday’s report.
Yesterday we had a bearish crossover on the exponential oscillator for December corn. Today’s selloff keeps that sell signal intact (see chart). The 50 day simple moving average is at $7.46 ½. If December corn is able to settle below $7.85, I would use the 50 day SMA as the next downside target.
Chart: December Corn
Soybeans continue to look strong until we see a significant change in demand. Upside resistance is seen in November at $17.92 and downside support at $16.60.
Chart: November Soybeans
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