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260216

Grain Markets Align Themselves Before Next Week’s Report

The market ended the week on a rather volatile note as the July option expiration kept traders on their toes. For the week, the July contract lost 20¼ cents. The lack of weather threat has longs liquidating positions and funds adding back to their short positions. After this week’s selloff, we are trading at price levels not seen in seven months.

In addition to the bearish forecast, the trade is bracing for some negative numbers next Friday when the USDA releases grain stock and acreage updates. The trade is looking for bean stocks to come in at 991 million bushels. A decent jump from last year when the stocks were projected at 872 million bushels. The trade is looking for soybean acres to come in at 89.86 million, up from the March estimate of 89.48 million. Last year, the U.S. planted 83.43 million acres of beans. It is interesting to note that the trade is looking for the U.S. to plant more acres of beans than corn for the first time ever.

Technically, the market took out and closed below the spring low of $9.15½ basis the November contract, not a bullish signal. Tradewise, we would not recommend getting too bearish as we still have a long summer in front of us. With the market technically oversold and pressing seven-month lows in front of next week’s report, we are setting up for a classic sell-the-rumor-buy-the-fact reaction action once the numbers are released.

Rich Nelson | Allendale Inc. | 815-578-6161

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