EHedger Afternoon Grain Commentary 10-3-2011

Published on: 15:27PM Oct 03, 2011

After a wide trading range, grains finished mixed with corn unchanged, soybeans slightly lower and wheat higher. With corn lock limit down on Friday, limits were expanded to 60 cents today.  Initially we found plenty of weakness in the overnight trade, touching new lows for the move at $5.72¼ before coming back to finish at $5.92½.

Corn, beans and wheat are all well oversold at this point and could be due for a rally. With December corn trading $2 off its highs and November soybeans $3 off their highs, between now and the Oct. 11 report would be a good chance to see short covering. The funds have been liquidating and are a major reason for the sell-off, along with normal harvest pressure. As we continue through harvest, we could see bushels coming to market keeping grains resisted, especially after rallies. This may make it hard for grains to sustain any sort of a rebound unless there is a fundamental change, such as another decrease in yields on this next supply and demand report. Although the market looks oversold, we don’t want to forget about 2008, when corn fell back into the $3 range and soybeans fell back to $8 to $9 levels, as equities and commodities both liquidated during the financial collapse. These last two months in equities have reminded the market how unstable they still really are.

Crop progress was released today and is as follows:

Corn                                                             October 2nd                         5-year average

Mature:                                                           79%                                        78%

Harvested                                                        21%                                        23%

Condition:  Unchanged with the good-excellent category remaining at 52%.

Soybeans                                                       October 2nd                         5-year average

Dropping Leaves                                                  76%                                        83%

Harvested                                                           19%                                        25%

Condition:  Gained 1% in the good-excellent category at 54%.

Winter wheat is 42% planted, while the average five-year pace is 53% at this week.

We will see where they end up taking demand away from when we get the October S&D report, but until then the quarterly stocks report was certainly bearish. So where do we go from here? For soybeans, we have hit the 50% retracement at $11.86 already. The next target (maybe support) would be at the 68.2% retracement at $11.19¼. For corn, we blew past the 50% retracement today at $5.80¾, but managed to rebound and trade higher. The next downside target would be $5.33 (68.2% retracement), with upside resistance at the 200-day moving average of $6.43¾.

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