Grain Spreads: Putting on the Brakes

The grain markets all took pause the last two sessions slowly pulling back from Mondays rally as harvest pressure reigned in prices. If one looks at deferred corn and bean prices sitting well above 9.00 a bushel in beans and just over 4.00 in corn, it should be an easy decision for the producer to layer in small percentage hedges at these levels. With spot beans over 80 cents and spot corn over 35 from the September lows, both markets took pause the last two sessions due to harvest conditions improving this week. Old crop/new crop bean spreads have shown some life the last 7 to 8 trading sessions rallying 8 to 10 cents from their September lows. I attribute this to shorts rolling or covering positions in front month contracts, i.e. (Goldman Roll) to sellers re-emerging in the soy complex using new crop contracts (Nov 19) anywhere 9.50 on the Board and establishing shorts there. Its not a bad idea as a percentage hedge given weakened demand prospects. Watch these levels in my view going forward for beans and corn. Dec Corn 369 support. If it doesnt hold its 362. Major resistance is 377.4. A close over and 389 could be next. Beans (NOV 18),support at 883. If we take it out the market could push to 861. Resistance is 906 and then 914.4. Half way back on the year is near 945. As i have said previously, watch meal here. I think its the key for beans. Dec meal support at 317. A close under and its down to 3.05. Under 3.05 its last years low at 293. Under that it gets real ugly. Major resistance is 327.7 this week. A close over and its 341 next.

Wheat- all three classes took a hit today as selling was the theme. In my view there continue to be reasons to be long with global crop sizes declining and rising basis levels. Yet we have seen pause in this sector yet again as managed funds sit long KC wheat (20 K) and short Chicago (18 K), to give them a combined slim long position in the market per COT data as of last Friday. These same funds were combined net long around 131 K, KC and Chicago combined in early August. Is there enough ammo to build a more aggressive position? Sure, but it may take some time and possibly not until the November crop report before we get a sizable surge in price. That assumes nothing entering into the market first. Trade the charts here let others worry and argue fundamentals. Major support for Chicago wheat this week is at 509 and then 505.4 . If they dont hold its 487.0 and then bon voyage down to 461. Dec KC wheat showing support at 512.4 and then 5.01. If they fail its 491 then 464.4. Major resistance for Chicago is 530 and 531 for KC.

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