First, ethanol use of corn is running behind the seasonal pace to meet current USDA expectations. Our models are indicating that if the current use of corn for ethanol continues we will fall about 125 million bushels short of current USDA projections. Feed demand is another area of concern as the Cattle on Feed report from last week showed significantly lower placement figures than last year at the same time. Export sales for corn and soybeans were disappointing this week coming in below expectations. Wheat was the lone bright spot as far as exports were concerned, exceeding expectations.
Despite weak sales this week, corn and beans are still ahead of pace to meet current USDA projections mostly due to pre-sales from last year, but have slowed drastically over the last several weeks. It is interesting however; that corn export inspections (the amount actually being shipped) is lagging behind the pace needed to meet current estimates. Bottom line is that demand destruction has taken place for corn at these price levels and prices need to move lower to spur more robust demand.
Technically speaking, for soybeans the November contract is meeting heavy resistance in the $15.65 to $15.70 area on the daily chart. Providing resistance is the 100- day moving average and in the area is the bottom of the range that was traded in July and August. It will most likely take a weather development from South America or stronger outside markets to push past this level with conviction. In the short term, the upside potential is rather limited for soybeans.
Looking ahead to Friday, we get the options expiration for November contracts and the third quarter gross domestic product figures will be released at 7:30 AM central time.
