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USDA right on yields

Both old and new crop corn saw high volume selling Friday. 

New crop corn broke $5 and was below that level for the first time since Dec 17, 2010. Stop shoppers came in and bought the sub $5 corn to instantly turn December back up for now, but in the long term, a major door has been opened to a continued grind lower. Corn was subject to “light” fund selling Friday, partially moving in sympathy with heavier fund exiting of beans. Of course, the other major part of Friday’s selling was the bearish report from yesterday. Hitting sub $5 stops could actually offer a short term bounce. We have a hard time looking for a major bounce unless weather turns for the worse, which is not in the extended forecast right now. Funds do not have nearly as much corn to sell as they do beans but when they typically liquidate longs in one market, they do it for all markets. This puts more pressure on old crop corn than it does new crop. Old crop traders should remain highly cautious of continued fund selling as they will be selling July more than any other contract. Buyers in old crop should try to make their stand close to support where next chart support is at 568 1/4. New crop hedgers should look to take full advantage of bounces. Only major weather concerns should cause hedgers to hold off selling moderate bounces. Next week can see a bounce if funds slow their selling. Watch the dollar closely now as a bounce in that market could continue grain selling again next week…Ryan Ettner

USDA is Right on Yields: You can make some legitimate arguments with some of USDA’s numbers from yesterday. Their % harvested estimate is a record (too bearish), their feed and residual use estimate is too high (too bullish), and their export estimate is too low (too bearish). One thing which should be taken seriously is their yield estimate. When they raise it from February to May, based on good planting progress, they are usually right. In the six years where this happened before, yields ended close to the big May number four times. It takes a big swing in weather from here on out to move yields (2004 and 2010). The long term forecast for May – July is normal temps and normal precipitation. Early planting, new genetics for 2012, and perfect weather should make for record yields. Our target remains $3.80 for December corn...Rich Nelson

Trade recommendations:

(5/10) Sell December corn 535, risk 550, objective 505.

Working trades:

(5/11) Sold December corn 499, risk 515, objective 460. Closed 506 ½. Early sales in Colorado at $121 are steady with last week. That would imply Kansas through Texas at $120 which would also be steady with last week. Last official bid/offers are $119/$121 so it seems reasonable. Another piece of fundamental news out Friday, March foreign trade, held slightly bearish news. Though beef exports did rise from February, they were a full 21% under March of last year. We should run a little under last year, as is our production level, but that amount is a little concerning. For price direction we cash cattle to be range-bound from $119-$121 for the next two weeks then fall to $116 for a summer low. In other words, summer futures are priced where they need to be…Rich Nelson

Trade Recommendation:

Stand aside


Rich Nelson 

Director of Research 

Allendale Inc. 

4506 Prime Parkway 

McHenry, IL 60050 


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.

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