Carl German, Extension Crops Marketing Specialist; clgerman@udel.edu
Commodities Rally on ‘Game Changer’
The July 9 USDA report was thought by some analysts to be a ‘game changer’. The idea of large stocks of U.S. corn and soybeans growing from previously projected levels for the ‘09/‘10 and ‘10/‘11 marketing years was essentially erased. Instead of building stocks, the U.S. is now looking at a situation where production is just keeping pace with projected demand. In other words, total use is out pacing production for U.S. corn and running very close for U.S. soybeans.
Weekly Crop Conditions were reported to improve slightly for the U.S. corn crop this week while the overall condition of the U.S. soybean crop declined slightly for the fifth straight week. Hot temperatures reported in pockets of the Corn Belt has moved Dec corn futures past resistance at $3.97 ½ overnight. This sets the stage for an extended rally in the near term. Buying interest by both commercial and non-commercial interests suggests that traders might find improving conditions reported this week for U.S. corn to be rather suspect. Hot temperatures are not expected to be widespread, however the new crop stocks-to-use ratio estimated at 10.3 percent for U.S. corn doesn’t leave much room for error, meaning any weather problem perceived or otherwise can lead to extending the rally in the near term for both corn and soybeans. Demand projections for U.S. corn and soybeans could eventually improve in ensuing USDA reports due to dry conditions reported in other corn producing countries e.g., Russia where row crops are under siege of one of their worst droughts reported in 130 years of reporting weather data.
The major question heading into the overnight session was whether the corn, soybean, and wheat markets could continue to rally. All three did, with December corn pushing past resistance while September wheat and August soybeans posted solid gains.
USDA Export Sales Report 07/15
Pre-report estimates for weekly export sales of soybeans (combined old-crop and new-crop) ranged from 27.6 to 36.7 million bushels. The weekly report showed total export sales of 45 million bushels, with old-crop sales of 24.5 million bushels above the 0.9 million bushels needed to stay on pace with USDA’s demand projection of 1.46 billion bushels. Total shipments of 7.6 million bushels were below the 12.1 million bushels needed this week. This report should be viewed as neutral to bullish.
Pre-report estimates had weekly corn export sales at 29.5 to 43.3 million bushels. The weekly report showed total export sales of 39.4 million bushels, with old-crop sales of 26.7 million bushels, well above the 1.6 million bushels needed this week to stay on pace with USDA’s demand projection of 1.95 billion bushels. Total shipments of 41.1 million bushels were below the 50.1 million bushels needed this week. This report should be considered neutral to bullish.
Pre-report estimates for wheat ranged between 12.9 to 16.5 million bushels. The weekly report showed total export sales of 11.4 million bushels, below the 16 million bushels needed this week to reach USDA’s projected 1 billion bushels. Shipments of 13.1 million bushels were below the 19.8 million bushels needed this week. This report should be viewed as bearish.
Market Strategy
July futures contracts are now expired and have moved off the board. New crop Dec ‘10 corn futures are trading at $4.05 per bushel; Nov ‘10 soybean futures at $9.76; with Dec ‘10 SRW wheat futures at $6.12 per bushel in this morning’s trade. The Dow is down 104 points at 10,261. Nearby crude is trading at $77.40 per barrel, up slightly on the day. The dollar index has declined, now trading at 82.56. With commodity markets trending higher, it is important to pay attention to technical indicators for price direction. For example, current technical analysis suggests that we can expect the corn and soybean markets to move higher from current levels. The next level of resistance for new crop corn is at $4.10 to $4.15 per bushel. For soybeans, the next level of resistance is at $9.87 for Nov ‘10 futures. Once those levels are penetrated then there could be some sell off due to the perception of the markets being overbought before resuming upside potential.
For technical assistance on making grain marketing decisions contact Carl L. German, Extension Crops Marketing Specialist.