We started the week off with our weekly crop progress reports. These report numbers are important, as traders hope to have a final look at this year’s crop size when the November 10th USDA monthly crop report comes out.
Corn harvest came in at 65 percent complete versus the ten-year average of 73 percent. Since numbers for the report are captured through the first of the month, there will be almost 35 percent of the corn crop still to come to harvest. Traders will then be doubtful about the November 10th report, putting all of the importance on the December report.
On the demand side, we had Monday’s weekly export inspection report. Wheat inspections last week were just 208 thousand metric tons down from the expectation of 300-475 thousand metric tons from the week prior, but well under the 800 thousand needed to be price friendly. Wheat sales remain a negative pricing source as cheaper wheat is being bought out of the European Union.
Corn inspections came in at 425 thousand metric tons, well below trade expectations of 725-900 thousand metric tons, which was the lowest total since the first week of September 2013. Clearly the import market sees US corn not as competitive with that from South America.
With the US being the sole port of origin to buy beans in the world now, demand remains robust. Inspections last week were a massive 2.77 million metric tons versus an average trade estimate of around 2 million metric tons. The market will continue to take profits off strong demand indicators for corn and beans until production is known.
The remainder of this week will have funds getting positioned for the November 10th crop report. Bloomberg News and a bevy of private forecasters, namely FC Stone and Informa, have already released pre-report trade estimates as to what the report numbers will be, and at first glance, they lean bearish.
Technical expectations through the remainder of the week come in as follows.
For December Corn, support is seen first at 3.70 with major support down at 3.60. Resistance is up at 3.80 and with a close over 3.94.
For November soybeans, major support is down at 10.10, with a close under 9.50, the next level down. Resistance is up at 10.50 then 10.75.
For December wheat, support is down at 5.20 and with a close below 4.94, the next level down. Resistance is up at 5.45 and then 5.75.
For a trade idea, I’m looking at buying the March Corn 4.00 calls for 10 cents or, in cash value, $500.00. It is our contention that with a late corn harvest and the fact farmers may be unwilling to take corn to the market to wait for higher prices, as they have done the last two years, could result in higher prices and a post-harvest rally. The risk on the trade is the price paid for the option plus all commission and fees.
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RISK DISCLOSURE: THERE IS A SUBSTANTIAL RISK OF LOSS IN FUTURES AND OPTIONS TRADING. THIS REPORT IS A SOLICITATION FOR ENTERING A DERIVATIVES TRANSACTION AND ALL TRANSACTIONS INCLUDE A SUBSTANTIAL RISK OF LOSS. THE USE OF A STOP-LOSS ORDER MAY NOT NECESSARILY LIMIT YOUR LOSS TO THE INTENDED AMOUNT. WHILE CURRENT EVENTS, MARKET ANNOUNCEMENTS AND SEASONAL FACTORS ARE TYPICALLY BUILT INTO FUTURES PRICES, A MOVEMENT IN THE CASH MARKET WOULD NOT NECESSARILY MOVE IN TANDEM WITH THE RELATED FUTURES AND OPTIONS CONTRACTS.
