In the past five weeks, corn, soybeans and wheat have finished at high prices for the week or at least near the highs, followed by higher Sunday night openings. The markets also experienced five consecutive higher Monday openings followed by selling off the Monday highs and then lower trade on Tuesday. The same occurred this week.
SMALL WINDOW FOR POSITIONING
Next up is a three-day weekend where the market is closed due to the Labor Day holiday on Monday. With that in mind, next Tuesday after the open there will only be three days for the funds and traders to get position for the Friday, Sept. 10 USDA crop report, which comes out prior to Friday’s opening.
The window of opportunity is small to get positioned. No one will want to be short going into that report, and speculators will want to be long.
FEAR
The market trades fear before fact. The fear is that the report will sharply increase export projections and sharply lower U.S. ending stocks. This worry comes from several fronts.
Weekly export sales reports have shown an aggressive, record pace for corn and soybeans the past month, and now the same thing is starting to happen for wheat. So demand is clearly stronger than what the government had been talking about several months prior.
Additionally, the European community is experiencing crop problems, with severe drought in Russia and the Ukraine.
The wheat planting is down in Canada and there is drought in northern Australia. These factors have led many to think that if the wheat crop suffered, everything from peas to soybeans and corn certainly suffered in these countries as well. This may be why demand is picking up and looks to continue. Therefore, there is a theory that the government will raise projected exports and lower ending stocks for the U.S.
KEY LEVELS
So what traders should look for this week is a low that gives them a buy lead-in ahead of the report.
December corn has support at the $4.26 to $4.28 area. Should corn get down there any day this week I would consider buying or I would buy on a close over $4.45. That carries a lot of risk, but I would much rather be a buyer off support ahead of Tuesday's opening.
Soybeans basis November had support on Wednesday at $10.04 and on Thursday at $10.06. Anything down to that support line should be bought or at a closing price over $10.32 this week. Traders will want to find a point to get long ahead of this report in hopes that they can at least get a dead cat bounce going into Friday and have a cushion before the market opens on Tuesday.
December wheat has support at $6.80 but it could take it out, making the next support level $6.64 for a dream buy or a closing price above $7.14.