(Resource News International) — Corn and soybean futures at the Chicago Board of Trade (CBOT) have moved higher over the past week, supported by production uncertainty ahead of the U.S. harvest and recent strength in the wheat market.
However, both soybeans and corn failed to move back to the highs set earlier in the month, and a U.S. analyst said such a move to new highs was unlikely in the near-term, barring a move in the outside markets.
“It depends a lot on the wheat market,” said Tim Hannagan, head grain analyst with PFG Best in Chicago.
The supply/demand fundamentals for soybeans and corn were both very bullish, he said, with expectations for tightening ending stocks in both commodities despite rising production numbers. While the strong demand should keep prices supported going forward, “I think we’ve priced in the most bullish situation for now.”
When U.S. farmers start to harvest their soybeans and corn in the next month, Hannagan said, it will be hard to encourage a rally in those markets without a move from somewhere else. Such a move could come from wheat, which will be watching the weather conditions in Russia and the rest of the former Soviet Union.
The drought that has cut into spring wheat production in the region has already largely been factored into the futures markets. The concern now, Hannagan said, is whether or not the drought persists over the next month, which would hurt winter wheat plantings in the region.
If there are timely rains and producers in the region manage to seed their winter wheat, wheat prices, and in turn soybeans and corn, could move lower.
However, if the drought persists, Hannagan said there would be a good chance of another rally in wheat. “They’ll either plant the bulk of the winter crop, or they won’t.”
In the meantime, he said, there could be a profit-taking pullback in all of the grain and oilseed markets.
For corn, Hannagan said the December contract could move down to the US$3.90 to $4 per bushel level on a correction, with November soybeans facing a downside target around US$9.80-$9.85. On the other side, firm resistance in December corn should be seen at the intra-day high of US$4.38 3/4 per bushel set earlier in the month.
The nearby high in November soybeans of US$10.49 per bushel should also provide resistance.
“As the harvest gets underway, there is always a little harvest pressure,” said Hannagan, “but I would imagine, at some point when there’s a lot of availability, demand will be very strong.”
After the initial harvest pressure, he said, the concerns about tight stocks farther on in the year will likely make some end users anxious to get their hands on some supplies.