Alpari Grain Report 9/18

  on September 18 2012 4:43 PM

Sunday night into Monday saw the grains slowly dissolve as old bulls sold long held positions and new traders sold short. It took the entire night and day session to finish the selling until finally December corn settled down $.33, beans down its $.70 limit and week off $.44. Several issues were responsible. The first was failure of the Friday, September 14 European Central Bank meeting to agree to a timetable to resolve the euro debt crisis. Finance Ministers fought over every issue of a potential bailout.

Second was an Obama campaign attack against China and their trade policies. His strong rhetoric had fear in the market that the Chinese could retaliate with a near-term slowdown in US bean imports. It's all psychological but fear trading is part of the trading psychology now that our grain growing season is over and Weathers no longer a daily pricing factor. As we move forward, outside markets will play a bigger role in daily grain pricing as index and trend following funds trading grains also are heavily position in the stock indices, metals, crude oil and currencies. Grain traders every day now look to direction in grains, in order of importance, from crude oil, as its importance to corn-based ethanol and soy oil-based biofuels. Then the US dollar in its relationship to export favorability. Stock indices then metals.

If crude oil, metals and stocks are all higher with a lower dollar on the day, grains move up. The reverse lower. After the close Monday our crop condition report came out. Corn crop improved to 24% good to excellent condition from 22% the week prior, but well under a year ago of 51%. No real surprise here as 26% of the crop is harvested. The earliest harvested corn was the worst, chopped for silage or feed use, but as we move further along we get the better yielding corn. The mindset is the worst of ratings are over.

Beans came in at 33% good to excellent condition, up from 32 last weekend 53% a year ago. It's the highest ratings since July 16, so the mindset is late maturing beans saw enough rain in August to see further improvements. It may only be two or three percentage points, but it tells the trade the worst is over. The long and short of the crop condition report is corn and beans longer have the condition reports and Weathers effect as a bullish pricing source. Our winter wheat crop came in 11% planted versus the five year average of 14%. All the big producers are behind with Texas at 60% seeded versus the five year average of 44%. Oklahoma 8% versus 15%, Nebraska 21 versus 35, Kansas 5 versus 7 and Colorado 15 versus 31%. Recent rains, especially in Texas have planters moving but the recent drought has them cautious as well.

No surprise to us with markets selling off on the third week of the month as funds have sold in the third week for six consecutive months and now seven. The prior months saw profit taking from rallies from the early month USDA crop report . This month profits taken were not crop report profits, but all profits from the summer rally, suggesting we could be into our seasonal post growing season and harvest correction. The risk of being short in a seasonal downtrend, after a bull market run left future ending stocks historically low, is that any fresh bullish news like demand could push prices sharply higher again on any day.

Technicals read like this. December corn support is 7.05. A close under and 6.75 is next. Resistance 7.60 then 7.80. November beans support is 16.20 then 15.90. A close under and 15.50 is next. Resistance is 16.70. December wheat support is 8.55 then 8.15. Resistance 8.75.

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