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Grain Hedge: After Rally, Grains Meet Technical Resistance

Grain Hedge: After Rally, Grains Meet Technical Resistance

21 January 2013

US - The grain markets, in particular corn and soybeans, have rallied sharply off of multi-month lows recently.

Commodity funds and managed money have accelerated the buying after a fundamentally bullish report released by the USDA. Thursday gave way to some technical selling despite solid export sales.

Corn's most bullish report in a while has rallied the market, gaining about 30 cents along the way. Friday, the market retested technical resistance in the $7.34 area. This resistance is provided by the bear trend line drawn of the high hit in late August and the high of late November. This will be an important area to watch over the next several sessions.

Ethanol production was abysmal last week coming in the lowest point ever reported. Export sales did rebound from depressed levels and were reported as 393,300 MT, which exceeded the high end of expectations.

Soybeans have rallied off of multi-month lows over the last week or so, only to fade a bit on Friday.

Technical resistance was met in the $14.46 area which was right on the 200 day moving average. The psychological resistance area of $14.50 looms overhead as well.

Soybeans are on sound fundamental footing; however, as crush numbers remain strong as do export sales.

USDA reported sales of 1,608,800 MT for marketing year ‘12/’13 in its weekly report.

Managed money has aided the rally since the recent reports allowing for some profit-taking ahead of the weekend.

Wheat for the most part followed corn and soybeans lower Thursday. Concerns still surround the winter wheat crop in the Southern Plains. The crop was off to one of the worst recorded starts before winter set in.

Moisture is needed to alleviate the drought, but little has been experienced. These poor conditions have underpinned the market and has aided in the rally. Export sales came in within expectations at 574,600 MT this week.

The grains have rallied over the last week to ten days, but did meet some selling pressure on Friday. Corn and soybeans are near some key technical levels to watch over the next few sessions and into next week.

Despite solid export sales across the board the grains slid lower. Managed money could be looking to take profits built up over the last few weeks ahead of the weekend.

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