The following market analysis is for the week ending Nov. 7.
CORN — A new president-elect for the United States and a relatively quiet week in commodities.
December dropped 26 cents for the week after trading a range of $4.22 to $3.74 1/2. Traders have sharpened their pencils trying to determine if corn will work from Brazil or the European Union into the eastern U.S. The last time this happened phyto-sanitary issues prevented any deals from occurring.
India has returned to the world market as an exporter, feed wheat is abundant (South Korea bought Black Sea feed wheat), Taiwan bought Brazilian corn and Israel bought European corn — not a bright week for corn demand. Corn export sales were in line with guesses at 18.6 million bushels, but expectations were pathetically low.
We are now 42 percent behind last year’s sales versus 40 percent behind for the last two weeks. Export sales are predicted to only be down 20 percent from last year. We need to average 31.6 million bushels per week to reach the U.S. Department of Agriculture forecast.
An already delayed harvest received another setback as winter weather moved across the Midwest. The outlook for the next couple of weeks looks wet and cold. We’ll need the ground to firm up to finish.
Corn harvest was 55 percent complete last week and is expected to hit 68 percent this coming week. The average for Nov. 9 is 88 percent and last year we were at 92 percent complete. Reports of better-than-expected yields continue to circulate.
Financial news this week continued to be bleak. The October jobless rate climbed to 6.5 percent from 6.1 percent in September and 6.3 percent was expected. This is the highest level since 1994.
The stock market was down 374 points for the week, at this writing, in post-election trading. Crude oil dipped its toe under $60 briefly at the end of the week and closed down $6.77 for the week. The International Monetary Fund lowered their world Gross Domestic Product estimate for 2008 to 3.7 percent from 3.9 percent, and dropped the 2009 GDP from 3.0 percent to 2.2 percent.
The U.S. dollar index was choppy and closed the week up 0.22 points.
The Vera Sun Chapter 11 bankruptcy is on the minds of many growers and commercials. How that pans out is uncertain.
OUTLOOK: Fundamentals are negative in corn. I wouldn’t expect anything on the USDA report to reverse that situation. December corn settled the week right on $3.75 support. The next support will come in at $3.50 and resistance at $4.01 in the short run.
SOYBEANS — January beans were only down 12 cents on the week due mainly to export demand and non-existent farmer selling.
If anything has a reason to show some strength, it is beans. Outside markets, however, will continue to exert heavy influence over the entire agricultural sector.
Decent export business this week, falling barge freight and limited grower selling combined to keep basis levels on the firm side. Weekly soybean exports were 32.9 million bushels, bringing total export commitments to 15 percent ahead of last year.
Exports are forecasted to be up 12 percent over 2007-08. We need 11.6 million bushels per week to achieve the USDA outlook. China accounted for 23.6 million bushels of this week’s total sales.
Barge freight was collapsing as the week ended. Earlier in the week it cost twice as much to barge a bushel of beans from St. Louis to New Orleans as it did to ship it from the Gulf to China.
The ag ministry in Brazil this week is forecasting their bean crop at 58.4 million metric tons to 59.3 mmt. ABIOVE, a Brazilian crusher organization, is estimating the crop at 61.4 mmt. The USDA’s last figure was 62.5 mmt.
OUTLOOK: Soybean fundamentals are decent, but with corn, wheat and financials questionable, can beans stand alone? January beans have mostly stayed with a range of $8.50 to $9.80 since early October. I see no reason for them to push out of that range in the near-term.
Nystrom’s notes: The November USDA report will be released on Nov. 10. The average corn yield estimate is 154.4 bushels per acre for a crop of 12.075 billion bushels versus the corrected October USDA numbers of 143.9 bu./acre and 12.033 billion bushels. Bean estimates average 39.3 bu./acre for a crop of 2.919 billion bushels versus the USDA’s 39.5 bu./acre and 2.938 billion bushels in October. This week’s changes: crude oil down $6.77, heating oil down 10.5 cents, gasoline down 14.6 cents, and natural gas down 2.6 cents, and the Dow was down 374 points.
Phyllis Nystrom is a market analyst with Country Hedging in St. Paul.