CORN

Corn prices were bullish for the month of September as corn closed 71 1/4 cents higher. Now what to expect in October.

Corn posted a major rally during the month of September as a combination of yield losses being reported in the eastern Corn Belt. Funds heavily bought the market as prices moved higher and their trading profits grew.

However, by the end of the month, the USDA had reported a bearish quarterly stocks figure and taken much of the bullish steam out of the market. Quarterly stocks came in at 1.7 billion bushels, well above the average trade guesses and also above last year’s 1.67 bb figure.

This means the U.S. can have some production losses this year as there is substantially more ending stocks on hand than previously thought. The Oct. 8 USDA supply/demand report now is expected to show a production figure similar to last month, but ending stocks should be nearly 300 million bushels larger than last month due to the USDA “finding” the extra 300 mb it “lost” in the June report.

Fundamentally and technically it appears as if the market has scored an important top when December corn rallied to the 50 percent retracement on the continuation charts of the 2008 highs. Assuming the market finds support in the Oct. 8 report, corn should try to retrace some of its losses during October before turning lower into the last half of the month.

Retracement levels of $4.90 to $5 should serve as resistance/selling points for the market.

SOYBEANS

Soybean prices were bullish during the month of September as soybeans closed 98 3/4 cents higher. Now what to expect in October.

Following the lead of corn, soybeans rallied during September, despite reports of solid yield reports from around the Midwest. Only in areas that sudden death syndrome were reported did yields fail to equal last year’s figures. Soybeans followed corn higher with the help of solid export demand, mainly from China and also on ideas that with higher corn prices, U.S. farmers would respond by planting more corn and fewer soybean acres in 2011.

Thus, soybeans were forced to move higher to keep pace with corn. Unlike corn, quarterly soybean stockpiles are similar to last year’s levels at 151 mb this year versus 138 mb last year. This month’s supply/demand report should leave production figures as well as ending stocks nearly unchanged from a month ago.

Production could increase, but demand, due to exports, should also increase, resulting in a flat ending stocks figure. Unless dryness develops in South America, producers should use a short-covering rally early in the month of October to hedge or sell production.

A rally back to $10.90 to $11.15 will serve as resistance.

Corn analysis

Corn closed the week $.56 lower. Last week, private exporters reported a sale of 108,712 metric tons of corn to Japan in a private tender.

Last week’s crop progress report showed harvest is picking up steam with 27 percent now harvested nationwide versus 15 percent harvested normally this time of year.

This is the fourth fastest harvest pace on record. Last year, there was only six percent harvested at this time. Early yield reports remain disappointing compared to a year ago, however the crop is more mature than last year.

This year’s export profile is now at 687.5 mb versus the USDA forecast of 2.1 bb. Large speculative traders added to the already net record long positions last week.

Soybean analysis

Soybeans closed the week $.69 lower from last week. Last week, private exporters reported sales of 165,000 mt to China and another sale of 110,497 mt of soybeans to China.

The USDA reported, as of Sept. 26, the U.S. has harvested 17 percent nationwide, slightly ahead of the average pace of 13 percent and well above last year’s pace of five percent.

The weekly export sales report showed net sales of 1.737 mt were up 60 percent from the previous week.

The primary destinations were China (1.29 mmt), including 165,000 mt switched from unknown destinations and decreases of 1,000 mt), Indonesia (191,900 mt, including 60,000 mt switched from unknown destinations and decreases of 400 mt), Taiwan (103,400 mt), and the Netherlands (76,100 mt, including 70,000 mt switched from unknown destinations).

This year’s export pace stands at 781.8 mb versus the USDA forecast of 1.485 bb.

Brian Hoops is president and senior market analyst of Midwest Market Solutions Inc. Midwest Market Solutions is a full-service commodity brokerage and marketing advisory service, clearing through R.J. O’Brien.