The U.S. Department of Agriculture gave us some friendly numbers in the Quarterly Stocks report, which helped to propel corn and soybeans higher. Wheat saw some spillover strength, but for the most part this week’s data wasn’t too helpful for wheat and that market has been reliant on harvest problems in the north to provide support. The most supportive figure of the report was the corn stocks number that came in well below expectations at 2.11 billion bushels. This means beginning stocks must be reduced to that level and we will see new crop ending stocks fall below the 2 billion bushel level. If USDA cuts the yield or acreage estimate, it will drop the new crop ending stocks even further, and we will begin to shift from a bearish supply outlook to one that is on the verge of bullish.
Soybean stocks were also lower than expected at 913 million bushels. That figure is still bearish, but it was 92 million below the estimate in the September supply and demand report and, like the corn, the cut will have a significant impact on the new crop ending stocks estimate that we get next week. A yield cut in the soybeans could drop the new crop ending stocks below 500 million, which will at least get speculators attention.
The corn and soybean charts look friendly, partly because of the size of the gains that came after the stocks report and partly because the gains moved the markets through some key resistance areas. The next upside objective for the December corn is the $4.21 area and it is $9.35 for the November soybeans. Those levels could be reached by Friday the 11th if we aren’t derailed by bearish USDA numbers on Thursday.
Overall, one would say that the wheat charts suggest further gains, with the Minneapolis contracts looking strongest and Kansas City the weakest. We don’t have a lot of fresh news to work with and the October supply and demand report won’t be all that interesting for the wheat, so we need export sales and action in the corn to determine direction. A move back above the 50-day moving average in the December KW, would be a good buy signal.
Cattle had a very strong week and all cattle contracts, except the December live, have now regained the post fire losses. The December live got within 0.025, so it was very close. There was cash cattle trade in Kansas reported at $107, which likely means that there will be trade in Nebraska higher than that. The feeder cattle index is also on the rise and we will likely see it closer to $150 than $140 very, very soon.
The most negative thing to talk about is that the technical indicators are “overbought,” and some contracts are due for a correction. The fundamentals suggest otherwise, and the fundamentals will likely win out. Be patient with hedges, and speculators should consider using dips for initiating long strategies through the next week. For chart objectives, use the $114 area in the December live and the $149.50 area in the November feeders.
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This material has been prepared by a sales or trading employee or agent of Schwieterman, Inc. and is, or is in the nature of, a solicitation. This material is not a research report prepared by Schwieterman, Inc. Research Department.