Schwieterman: Lots Of Corn Still To Be Sold, Charts Suggest December Cattle Headed To $83.50
11/06/2009 04:13PM
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GENERAL COMMENTS:
The December gold made new all time highs this week and moved briefly above the $1100/oz. level. It was a very impressive rally considering the Dollar did not fall to new lows for the move. However, it does look like the bounce in the Dollar is over with and it won’t be surprising at all to see new lows next week.
Next week is the November supply and demand report. The estimates for corn production range from 12.674 billion to 13.4 billion, so opinions are obviously mixed when it comes to yield. Some think the slow maturity of the crop and disease issues will prevent us from having a record yield, while others see no problems at all. We shall see. I don’t think USDA will quit making adjustments to the yield estimate until at least January. There just hasn’t been enough corn harvested to really know what we have.
As for the soybeans, the average trade guess calls for a small increase in production and a small increase in ending stocks. It seems that the majority of yield reports are very good and that a production increase is likely. There are harvest delay concerns and other issues, but it seems like the good comments are outweighing the bad.
CORN:
Trend: Short Term Down – Long Term Up
Sentiment: Very Choppy There was certainly a lot of activity in the corn market this week, but the December contract only gained a penny when it was all said and done. The market had very good gains to start the week, but gave them all up by Friday. The outside markets didn’t seem to play much of a roll this week, which is a change of pace, but that made the trading pretty confusing. When you get used to weakness in the Dollar, or strength in the stock market helping the grains, and then it doesn’t happen, one gets out of step and I think that added to the volatility.
On the charts, short term technical indicators are turning down, but the market held at trend line support twice this week. Monday’s trade will be critical from a technical stand point. Failure at the trend line will make $3.58 and $3.45 the next downside objectives.
In the short run we have to worry about improved harvest progress. There is still a lot of corn to be harvested and sold, which can put a great deal of pressure on the market. A lower yield estimate on Tuesday would offset that, but a neutral or negative report will result in lower prices.
Action: December $3.60 puts are less than 10 cents. They would be a good buy for short term protection.
WHEAT:
Trend: Short Term Down – Long Term Up
Sentiment: The December KW was 1 better than the corn and gained 2 cents for the week. Like the corn, the wheat had good early strength, but gave it all up Thursday and Friday. Also like the corn, the December KW is finding support at an uptrend line and is just above the 40 and 50-day moving averages.
The news isn’t very friendly. Export sales were poor at 284,500 MT, the weather is favorable for getting the rest of the crop planted, and weakness in the Dollar provided no support. Tuesday report probably won’t have any market moving information, but if the corn moves drastically in one direction or the other then the wheat will follow along.
Action: Watch the charts. A close below the 50-day moving average will point to a move back down to $4.50.
SOYBEANS:
Trend: Short Term Down – Long Term Up
Sentiment: Great demand, but growing supply The soybeans were the worst performers this week with the January contract failing at trend line resistance, falling below the 50-day moving average and losing about 20 cents. The charts look bad, expectations are for a negative report, and there will be great harvest activity over the next couple of weeks.
In the short run the market doesn’t look good. If USDA raised yield and ending stocks it will look worse. Export demand is great, but it just isn’t enough to offset The information contained herein is based on data obtained from recognized statistical services and other sources believed to be reliable. However, such information has not been verified by us, and we do not make any representations as to the accuracy or completeness. Past results are not necessarily indicative of future results. All statements contained herein are current opinions which are subject to change. The risk of loss in trading commodity future contracts can be substantial. You should therefore carefully consider whether such trading is suitable for you in light of your financial condition. Neither the information, nor any opinion expressed shall be construed as an offer to buy or sell any futures or options on futures contracts. the big crop. Time will tell what crop size really is, but that the moment we have to plan on bigger numbers.
Action: Soybeans have good potential down the road, but plan on weakness in the short run. If you are storing beans consider buying the $9.60 January put.
CATTLE:
Trend: Short Term Down – Long Term Down
Sentiment: Steady, but very light cash trade. Last week’s plan was to sell a bounce in the December LC and add to the position on a close below $85.25, which we did on Friday. I am very comfortable with that position right now. The charts suggest the December contract is headed back to $83.50.
Boxed beef was only slightly lower this week, which you can try and spin as positive if you want, but I would look for weakness next week. Pork prices were weak on Friday and the hog charts look like they are ready to roll over too. I may be too negative right now, but I would plan on next week being rough on the livestock.
Action: You should be short LC and bounces are for selling more.