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Corn falls on acreage number

Fundamental Support: Corn was unable to shake off the recent bearish fundamentals offered up the last two days. What trade did find was the expected support as soon as December corn fell below 640. Buyers below that level appeared plentiful as the low of the day was made quickly after breaking 640 for the first time. Another early estimate on corn acreage was released today coinciding with other guesses which all call for an acreage increase. That paints another bad picture for December ‘12 corn and is the key reason that contract has lead corn lower for the last three days. This same news drew current December corn lower as well and is the reason that December finally broke the 640 level. Support found in current December corn is not being seen in next year’s new crop. It should be mentioned that next chart support for next year corn is actually the contract lows of 549. On the weekly chart it can be seen that this week’s bearish news was enough to break a streak of five straight weekly gains. In all it was a rough week for the corn and the bulls need to see 630 held. Bulls will defend corn well in the 630’s next week. Bears have momentum on their side with the bearish news this week. We need to keep in mind that the USDA carryout number still suggests a fair price of 636 and that is still above the most important support. Even some positive bean news would be enough for corn bulls to buy but as of now those bulls need some news (macros, lower dollar, new fund buying) to cause a bounce back up to the 660’s.

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Acreage: Allendale expects an additional 4.2 million acres to be divided up among the top three grains in 2012. The other two firms that we have numbers for are expecting even more. For corn, our bias is to adjust our 1.5 million acre increase higher. Producers have told us recent dry weather has caused them to do a little more fall fieldwork than expected a few weeks ago…Rich Nelson

Trade recommendation:

·          (11/10) Sell December corn 660, risk 670, objective 645.

Working trades:

·         (11/11) Bought December corn 640, risk 629, objective 660.

Closing Cattle Commentary 

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One question we get from producers, mainly in the Northern Plains, is “when will expansion start?” For many of those producers, expansion has already started. The key right now is the age old moisture issue. If the Plains get a moisture recharge next spring, perhaps those producers will get interested. Even if moisture returns we must also point to the available acreage problem. Since 2002 we have lost 6 million acres. For the 2012 season, expect another half million to disappear as row crops dominate. Our answer to the expansion question, “…not in 2012” For short term news, this week’s record cash cattle pricing may have been the breaking point for packers. They reacted by dropping kill levels even more than the holiday would imply. Normal weekday kills run 130,000 head. A normal Veteran’s Day level is around 115,000 head. We were surprised to see USDA put the day’s tally at a very low 94,000. Look for lower cash cattle next week.

Working Trade:

·         (09/07) Sold 2 April 118 puts 2.57 each, risk to 3.00, objective 0. Closed 1.80.

·         (11/11) Sold December 125 call 1.15, risk to 1.80, objective 0. Closed .67.

Hypothetical performance results have many inherent limitations, some of which are described below.  No representation is being made that any account will achieve profits or losses similar to those shown. In fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program.  One of the limitations of hypothetical performance results is that they are generally prepared with the benefit of hindsight.  In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk in actual trading.  For example, the ability to withstand losses or adhere to a particular trading program in spite of trading losses are material points which can adversely affect actual trading results.  There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all of which can adversely affect actual trading results.

Rich Nelson

Director of Research 

Allendale Inc. 

4506 Prime Parkway 

McHenry, IL 60050 

815-578-6161 

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