EHedger Afternoon Grain Commentary 9-23-2011

Published on: 15:16PM Sep 23, 2011

More liquidation today as corn and soybeans both have double digit losses.  The December corn contract finished 11 ½ cents lower at $6.38 ½.  November soybeans finished 25 cents lower at $12.58, and December wheat 7 higher at $6.40 ¾.

We are now trading a full $1.40 off the highs for December corn and finished just below the 200 day moving average of $6.41.  At settlement below this important level could potentially trigger more sell pressure as we haven’t settled below the 200 day moving average in December 11 corn since July 27th of last year!

Soybeans also broke a major support level yesterday and came all the way down past the 38.2% retracement level of $12.53 today.  The next technical target for bean bears would be the 50% retracement of $11.86 ¼.

Informa released their estimates mid morning.  They have corn acres down 420,000, soybean acres up 50,000, and ALL-wheat down 765,000.  Wheat was supported for most of the day and this news certainly helped.  I would say a bigger reason for wheat to be rallying is short covering.  The funds have obviously been massively long corn and soybeans, and at the same time short Chicago wheat.  On days of liquidation we can see those contracts gain ground just from exiting positions (we have seen this same trading style in the nat gas vs crude spreads as well in times past).  Plus we have been trading wheat at a discount to corn for how long?  With feed wheat trading at such a discount to corn throughout the world eventually we will get a reversal as much of that demand switches over from corn.

The latest Commitment of Traders report shows us that managed money was net short 24,908 contracts of Chicago wheat (using futures and options) which is a net increase in shorts by 13,759 contracts.  They are still showing a very large net long position in corn of 249,977 contracts even after reducing this by a whopping 48,356 contracts week-over-week! For soybeans they are still net long 115,791 contracts after reducing their net long position by 42,890 contracts.  I think these numbers show that the managed money have obviously been bailing on positions and this information is as of Tuesday so we won’t know how much more they liquidated until NEXT Friday.  Even though they have liquidated a significant amount, they are still sitting with some very large long positions that can still be sold to push us lower so I wouldn’t jump to any conclusions that this phase is over just yet based on this particular data.

With that said we still have to get through the next couple of reports for more long term direction.  We will know the ending stocks data next Friday and then the October Supply and Demand report will be just around the corner from that.  Now may be a good time to uncover short calls that are well out of the money.

If you would like to double check where you stand after the most recent break please give an EHedger broker a call and we can go over your position in AMMO. 

Have a great weekend and good luck with the rest of harvest!

Bean Chart 9.23.11

Corn Chart 9.23.11

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