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Post-Labor Day choppy trade

After the holiday weekend and ahead of some big upcoming reports and speeches, traders settled into a choppy, mixed pattern.  The Dow is up 55.63 on the week ending trade at 11,295.89.  Oil continues to slowly climb towards the upper end of the recent trading range adding $2.18 to settle at $88.90 on Thursday.  Gold remains a volatile market and is down $19.50 this week to $1,859.60.  The dollar index moved sharply higher adding to a bearish tone in the grain markets.

Corn has slipped 26 cents this week on the December contract that now stands at $7.34.  Traders are taking risk and profits out of the market as there is a great deal of uncertainty surrounding the supply projections due out Monday from the USDA.  

Technically, the market looked over bought after hitting all-time highs last week at $7.79. Demand revisions are also imminent on Monday as export and ethanol usage missed the marks set for last year.

After breaking out of a long-term range last week and hitting contract highs at $14.65, November soybeans has sold off and is down 27 ½ cents this week to settle at $14.18 ¼ today.  The market is now testing support levels in the $14-$14.10 range. Fundamentally, soybeans look weak from an export standpoint as sales are well behind the pace needed to meet USDA projections.  Traders are looking for weaker yield forecasts in the reports due out Monday.

Wheat was the leader to the downside for the grains losing 37 ½ cents to finish trade at $7.38 on the December CBOT contract.  The market continues to be pressured by ample world stocks, increased export competition and a strengthening dollar.  An unrelenting drought across the major hard red winter wheat areas are causing concerns surrounding planting prospects and are providing underlying support for now.  Hard red spring wheat harvest is well behind its usual pace, but should wrap up in the next couple of weeks.

A return from Labor Day weekend left the markets searching for a direction in lieu of the USDA reports and Obama’s speech.  The equities have found some support at its current level, but are not eager to move higher.  The agricultural commodities headed lower as risk and profits were taken off of the table ahead of the Supply/Demand and Crop Production reports to be released Monday.  Look for these patterns to continue heading into the weekend.

Every marketing year presents different challenges to producers, and this year is no different, as a unique situation has developed in the cash market for corn. Typically we expect new crop corn basis to drop significantly as we approach harvest, encouraging producers to store their grain rather than make cash sales off of the combine. In 2010 we saw this storage incentive develop in the month of August and continue into harvest. This year the cash market is not rewarding storage to nearly this degree as basis for new crop delivery has marched higher since early May.

Basis levels have been pressured higher throughout the summer as delayed planting initially concerned the market and more recently a sweltering heat wave across much of the Midwest have brought 2011 corn yields into question. It looks like basis levels have stalled at their current levels, and it is hard to believe that basis levels will be able to push even higher as we move into harvest. Now may be the time to lock in these unusually high basis levels for harvest delivery.

As we turn our focus to new crop soybean basis, a different story emerges. Currently soybean basis levels are ten to fifteen cents below where they were at this time last year.

With lower basis levels coming in to harvest, the soybean market is encouraging producers to store their 2011 crop beans and wait for basis levels to inch their way back up as we move away from harvest.

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