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Published October 05, 2010, 08:50 AM

Futures trading volatile

Futures trading for soybeans, corn and wheat was volatile the week of Sept. 27. In fact, October may continue that trend.

Futures trading for soybeans, corn and wheat was volatile the week of Sept. 27. In fact, October may continue that trend.

While corn futures moved higher from the June 30 quarterly stocks report to gain $1.85 1/2 in a little less than three months, they went down in the Sept. 30 stocks report. The trade was surprised by USDA estimating Sept. 1 stocks at 301 million bushels more than anticipated. However, the South had gotten an early start on harvest this fall, and, so did parts of the eastern Cornbelt. It is possible some new crop corn got shuffled into old crop stocks.

While this should create bigger early supplies for the 2010 to ’11 crop year, I wonder if we will see confirmation of that in Dec. 1 stocks, which now are being reported lower-than-


USDA, in its supply and demand report of Sept. 10, estimated new crop corn yields at 162.4 bushels per acre. After the Sept. 30 quarterly stocks report was released, the increase in stocks could equate to four bushels to the acre.

Therefore, a drop to 158 bushels per acre would almost feel muted out. Quarterly stocks also were 35 million bushels above last year. We in Iowa have seen a beautiful week of harvest weather. In this area, it’s a toss-up as to which crop is coming out the quickest.

Honestly, corn needed to take a breath. If the assumption is that corn futures will reach highs during the first half of next year, is it right that this market needed to pace itself?

Corn needs to gain acres to meet demand for ethanol production and feedgrain consumption around the world.

The longest we have gone without a drought is 23 years. This year is No. 22. The Southeast has been dry. Sixteen of our last 17 droughts started in the Southeast and moved Northwest a year later. La Nina appears to be strengthening and may become a multi-year event. If so, all eyes will be on Argentina and Brazil’s ability to produce record crops.

In some areas, I hear cash rents are starting to push higher again, and they’re probably being nudged by higher land and grain prices.

Yields seem good on soybeans. Analysts think soybean yields are good enough to increase USDA’s bushels-per-acre estimate. We may have seen the highest soybean yield in September’s supply and demand report.

Corn yields are expected to drop in October’s supply and demand report, and, usually, when yields increase in August and decline in September, they decline again in October and January. I believe highs still are in the cards for corn, and since we need more acres next year, I think corn will need to ration acres. The Sept. 30 numbers, though, may make one think not.

Aggressive, long-term drops in this market, in light of declines in the dollar and yen and rises in the Chinese Yuan, should create more export demand. I think the dollar will trade down on the December contract towards $77.31. Should that occur, the dollar may fall, but it will be at major source of support.

Grains should not stay down long. However, a bottom in the dollar could be what stalls grain markets, depending on where that price is. Corn prices at $5.44, $5.50, $5.76 or $5.77 are potential stalling points based on the December contract. Of note, on Sept. 27, December cornmade a 50 percent retracement between the June 2008 high and a Dec. 5 low of $2.90. A 50 cent break wasn’t so unexpected after all. How deep can a correction be? An uptrend from the June 30 low on December corn comes in at $4.62 — a 38 percent retracement from the low to current high is $4.58 1/2. Long term, I suspect corn is a buy in the range of $4.58 to $4.75.