The commodity funds were out in full force today, which was the reason behind the strength in grains. Commodities, in general, were higher across the board even though the dollar was stronger. Most of the gains came in the overnight session, which is the typical “M.O.” of the funds. Keep in mind that they have a record long position in corn and are heavily long soybeans. Estimates are the funds bought 65 MB of corn during today’s session. How large their position gets before they unload is anyone’s guess.
Be advised that while the fundamentals are supportive of corn, it is not the case for soybeans. Longer term, the problem I see for commodities is that investors consider them as an asset class. We must remember that stocks, bonds and real estate pay dividends, and are asset classes, not commodities!
Corn:
December corn surged to 517.25 today, which is short of a target mentioned in previous comments at 520. Keep in mind that we are due to make an intermediate-term top during the period of prior to next Thursday. Support is likely on a setback somewhere just below 500.
Longer term, the wave pattern shows the market heading higher, while the cycles point to a major top occurring mid-October.
New crop sales should be at the 50 percent level.
Soybeans:
November futures traded to 1072 today, which is near a target mentioned in previous comments at 1075. However, we will likely climb to near 11-even. A top is due to occur during next week along with corn but it may be for the intermediate-term. If corn continues to lead soybeans higher, a longer-term peak may not develop until mid-October, just prior to the peak in corn.
Right now, we will have to see how events unfold next week.
New crop sales should be at the 45 percent mark. The unsold portion of the crop is protected with a long November put.
Wheat:
December wheat was higher today and remains in a sideward pattern from 677.5-754.5. However, if corn moves up, it could pull wheat along for the ride.
Meanwhile, there is a more bullish pattern showing the potential for a rally past the August high.
Old crop sales should be at the 60 percent level.