Grains finish lower ahead of weekend

Published on: 16:12PM Oct 07, 2011

Corn, soybeans, and wheat all finished lower today.  We continue to find sell pressure on rallies in grains.  Despite finding resistance, December corn still finished 7 ½ cents higher on the week.  November beans finished 20 ¾ cents lower for the week, and December wheat finished down 1 ¾. 

Favorable rains expected over the weekend helped KC wheat finish near the lows despite Minneapolis wheat trading as much as 42 ½ higher on the day.  The latest CFTC Commitment of Traders report shows the Managed Money still net short 31,957 contracts of Chicago wheat (using futures and options) after reducing that by 4358 contracts week-over-week.  They are still net long 26,318 contracts of KC wheat after reducing that position by 11,910 contracts.  For spring wheat, which has much smaller open interest (number of positions), they are net long 6,735 contracts.

The funds have also been reducing net long positions in corn and soybeans as well.  For corn Managed Money is still sitting long 171,334 contracts after liquidating/reducing the position by 32,535 contracts week-to-week.  We can see the same thing for soybeans with net long positions of 50,122 contracts with a net long reduction of 19,088 contracts.  The point here is that the big traders have been getting out of longs and is a main reason grains have been unable to sustain any rallies lately.

The market is oversold but for the liquidation to stop and fresh buying to come into the market we may have to see a fundamental change in demand or another reduction in yield on this next report.  This week we did see corn exports pick up but we will need to see even more demand come in.  We are trading down from the time we received Thursday’s export sales report despite this "favorable" news.  We also had a few sale announcements of US Soybeans to China this week which didn’t seem to do much for the price as we still finished sharply lower for the 5th week in a row.

I would only recommend buying back hedges with "defined risk" option strategies for those who are well sold in this market.  If you need more downside protection, please call in to discuss current strategies.  Have a great weekend!

Chart: December wheat

Chart: December corn

Chart: November soybeans

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