Plenty of reasons to be bearish on corn
Corn: Corn has not followed outside markets lately but Friday it just could not ignore the fact that crude was trading $2.50 lower on the grain opening. Right from the opening bell selling was seen in the corn that was reluctant to be found Thursday. With the help of crude being lower, good weather forecasts and some field drying there are plenty of reasons to be bearish this market.
Most of the support Thursday came from expectations that USDA will actually lower corn yield on Tuesday. We want to state that none of the producers we are talking with are giving us that idea at all. It would be no surprise to see yields unchanged. As of Friday corn was far from reaching support levels but selling Friday, especially late, brought December corn within 6 cents of that support. This week saw the end of fund buying early then fundamentals took over for the rest of the week. What we will need to watch out for this week is if corn does break support leaving itself open to the possibility of fund sell stops. This might wait to be accomplished until after the crop report on Tuesday but as soon as we put that report behind us if the weather still looks as good as forecasted selling could likely resume. After this week corn ended only a penny higher but took out many short positions in the mean time. We will remain fundamentally bearish and grateful that there was an opportunity to sell right off the truck with good basis and yields. Combines will switch from bean heads to corn heads this week and the true harvest pressure is expected.
Direction: Look for a test of chart support at 366-357. If this fails, then look for an eventual move towards 320. Combines will be moving in corn and hedge pressure is expected. This hedge pressure may come slow as drying rates will still determine the progressâ€¦Ryan Ettner
Hedge Action Alert: Allendale has officially started 2010 hedging. Orders are in for 25% coverage using December 2010 futures after todayâ€™s close. This will become active on tonightâ€™s electronic trade. Currently, we are 35% covered on the 2009 crop using options. 65% of the crop is still un-hedged.
(11/05) Sell Dec at 383 or on a 357 stop close. Risk 404. Objective 320.
(10/29) Bought March 400 put/sell 420 call 17, risk to 8, objective 35. Closed 20. (11/05) Buy March 410 put and sell a 430 call for 14 cents.
***Disclaimer*** The commentary and trades below are derived from technical indicators provided in our Allendale Advanced Charts pages and may not correspond with the fundamental commentary above.
Corn Technical Commentary: No technical commentary due to illness Vital Technical Indicator: the next projected major turn day is November 11.
Rich Nelson Director of Research Allendale, Inc 4506 Prime Parkway McHenry, IL 60050 800-262-7538
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