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It was a volatile end to the grain trade this week, due in part to active rumors in the corn market. The corn and soybean markets spent most of the week moving in opposite directions.
The soybean market continued its impressive march higher as values reached levels more than $1.25 above prices of just a month ago. Soybeans continue to find support from an uncomfortably tight balance sheet. In addition, the market is pelted with lower production estimates from the South American crop on a weekly basis. The soybean market showed its first real sign of weakness in several weeks as prices exploded to new highs, only to fail and close lower in the day on Friday. Soybeans did scratch out a $.05-$.10 higher gain for the week, lead by new crop values.
The corn market struggled all week after posting the highest values since early January on Monday. Prices slipped over $.30 from its early week highs on fund liquidation before finding support on Friday. The trade on Friday started out steady, as the monthly USDA report provided little fodder for either the bulls or the bears.
Shortly after the open however, prices surged on rumors that China had taken advantage of the recent price break to secure U.S. corn. The reports remain unconfirmed at this point, and some in the trade are dubious of these rumors due to the lack of significant strength to basis levels.
Ethanol production jumped this week by 10,000 barrels per day. Old crop corn values will need to remain firm to ration both exports and ethanol production; however, look for a setback in the grain markets early next week if the Chinese purchases cannot be confirmed.
There are a lot of recent longs in the soybean market as non-commercial traders have added length for the fifth consecutive week. Over that time, the market length increased by over 110,000 contracts by that sector. Soybean values have solid fundamental support beneath it, but I suspect that a correction in the neighborhood of $.50-$75 may begin next week.
(click the charts below to enlarge)