Wednesday, October 14, 2009
08:41 AM
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Wednesday, October 14, 2009
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Grain Marketing Commentary
Wednesday, October 10, 2009
Detail analysis of the October 9 USDA World Agricultural Supply and Demand Estimates and Crop Production reports can be found at the following web sites:
Melvin Brees – University of Missouri
Darrel Good – University of Illinois
Corn
Technicals
The December corn futures has moved into the price gap left after the June 30 planting intentions report of $3.96 to $3.75. The next resistance levels would be the price gaps at $4.10, $4.38 and the summer high of $4.73. For prices to move to these price levels would be the result of continuous poor harvest weather.
Price support is at the 10 day moving average at $3.57. The next support levels would be the price gap at $3.50 and then $3.35 where we find the 25 and 50 day moving average.
The daily price momentum indicators, slow stochastic and RSI, are overbought and are signaling a correction in prices at least in the short term. I have found over time, when you have the 14-day RSI over 70 and the slow stochastic over 80, you can expect a price correction. How soon it happens depends upon the supply and demand factors in the market. From May 7 through June 8 the slow stochastic stayed above 80 because prices continued to climb higher due to the slow planting progress. Presently, the RSI is at 72 and the slow stochastic is at 93. With both price momentum indicators oversold, it gives a stronger signal to look for a break in prices soon.
Fundamentals
Several bullish factors have all helped individually and collectively push corn prices higher. The freezing temperatures in the Mid-West have probably cut production and the snow and rains will make harvest slow and drawn out. Exports continue to be strong even though USDA cut export by 50 million bushels. The Chinese crop was cut 5 mmt and their ending stocks were cut 6 mmt. The dollar continues to get weaker and that should attract money into commodities.
I will admit I did not anticipate this big move in corn and all the commodities at this time. I was thinking we would pull back then start moving higher once we reached the half way point in harvest. I believe weather changed the direction in prices like it did this spring. Therefore, a pullback can be anticipated if we can get an extended break in the weather. Longer term, I believe with a weak dollar and good demand, prices should continue to move higher into the spring.
Marketing Plan
With both the 14 day and slow stochastic over 70 and 80 respectively, I recommend making some sales. If you want another technical indicator to help confirm the sale, I would use a close below the 10 day moving average which is at $3.57. I have found using the 10 day moving average in conjunction with the slow stochastic helps to confirm a change in price direction.
Soybeans
Technicals
The November futures have strong support at $8.80 and resistance at $10.17, $10.60 and $11.00. I see the soybean futures in a wide trading range between $8.80 and $11.00. If the harvest weather remains poor and the yield prospects start to deteriorate, prices will move up to the resistance levels and possibly to $11.00. However if weather improves, I expect a pull back.
Support is at the price gap at $9.68 and at the 50 day moving average. Next support levels are at the 10 and 25 day moving averages of $9.30.
The slow stochastic is oversold at 86 and is signaling a correct in prices. The 14 day RSI is not quite to 70, so we may have a little more upside possible.
Fundamentals
Just as in corn, near term weather will give direction to prices. The key is how much yield loss will be result from the weather.
In the October 9 USDA report, 2009-10 ending stocks were increased 10 million bushels to 230 million bushels and exports were increased 25 million bushels World ending stocks were increased 4 mmt with 3.5 mmt coming from Brazil and Argentina and .5 mmt from China. USDA is projecting a significant rebound in production from Brazil and especially Argentina in 2010. For the rest of the year, prices should remain firm. As we go into 2010, we will need to watch the development of the South American crop.
Marketing Plan
Because the price momentum indicators are oversold, soybean prices are vulnerable for a price correction. You can either make some sales now or wait until it closes below the 10 day moving average. The 10 day moving average is at $9.30, 60 cents below the closing price on Tuesday. However, if prices trade in the $9.90 to $10.00 price range for 3 more days the 10 day moving will be approximately $9.65.
Wheat
The technicals in wheat have turned positive even though the fundamentals continue to be negative for wheat. The July 2010 futures contract is trading above the 50 day moving average for the first time since last June. The momentum indicators, slow stochastic and RSI, are getting close to a sell signal. As I have mentioned before, I like to use a close below the 10 day moving average to confirm a sell when the momentum indicators are oversold. The 10 day moving average is at $5.11 on Tuesday.
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David Reinbott, reinbottd@missouri.edu Farm Management Specialist Last modified: October 14, 2009 |