Working On A Seasonal Low In Corn and Soybeans

October 11, 2011 01:04 AM

What Traders are Talking About:

* October crop reports out Wednesday morning. USDA will issue updated crop estimates and supply/demand balance sheets Wednesday morning. A survey of industry analysts by Dow Jones newswire puts the average guess for the corn crop at 12.492 billion bu., with the soybean crop guessed at 3.094 billion bushels. The biggest uncertainty is what USDA does with harvested acreage. For carryover, the average trade guess pegs 2011-12 ending stocks at 795 million bu. for corn, 181 million bu. for soybeans and 747 million bu. for wheat.

The long and short of it: Pre-report positioning is likely to keep price action relatively light today. Barring any major bearish surprises Wednesday morning, markets should be in the process of putting in seasonal lows.

* Bulls still have work to do. While corn and beans are working to put in seasonal lows as harvest rapidly progresses, there are still indications attitudes have not completely turned the corner. The biggest clue: Traders are still very willing to sell price strength. Until that changes, near-term price action is likely to be choppy -- although choppy to higher is entirely possible.

The long and short of it: There are increasing signs attitudes are changing in the corn and soybean markets, but they are not fully bullish yet.

* Investors display some caution. Monday's strong risk-on push was replaced with a more cautious tone overnight. But hopes are still building the euro-zone is moving in the right direction in terms of solving its debt crisis. Slovakia's government is debating over whether to broaden the European Financial Stability Facility (EFSF) -- the last country left to ratify changes to the emergency fund. While traders are displaying a more cautious approach today than on Monday, the risk pendulum is seemingly swinging up.

The long and short of it: Big short positions in the euro signal euro strength and dollar weakness is the most likely near-term course in the currency market unless a new problem arises in the euro-zone.


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