March 10, 2014
Morning Price Trends
Corn: Down 5 to 8
Soybeans: Down 2 to 9
Wheat: Down 6 to 8
Grain futures are lower across the board this morning, following profit taking overnight on the heels of last week's rally. Traders don't expect huge changes in U.S. carryout from today's USDA Supply and Demand reports due out at 11 a.m., with particular attention focused on soybean stocks here in the U.S. as well as production in South America.
Corn prices are softer, suffering from follow-through selling after Friday's bearish reversal lower from chart resistance. May futures last week briefly tasted the air above $5 before turning lower and failing to hold a move above the trendline in place since the 2012 drought rally.
The average trade guess sees a small increase in carryout possible today from USDA, with Farm Futures estimating a rise of 25 million bushels. However, uncertainty over how the crisis in Ukraine will play out is an incentive for the agency to keep its forecast unchanged, waiting to see key grain stocks data due at the end of the month.
Behavior from big speculators could be key after today's reports. Analysis of data from the Commodity Futures Trading Commission shows they've driven buying in ag commodities this year, while passive index funds stayed mostly on the sidelines. For more, see my Weekly Financial Review.
Hedge funds bought back another 55,533 contracts as of Tuesday, according to Friday's Commitment of Traders, extending their new bullish bet in corn. The preliminary report from the CBOT showed total daily volume up 22% on Friday to 392,664, while open interest gained 757 despite fairly active fund selling.
There were no lots delivered today against March futures after a brief surge last week. March goes off the board at the end of the week.
International markets are quiet so far to start the week. Israel tendered for corn and feed wheat, in a test of the market out of the Black Sea. Futures for May delivery on the Dalian exchange in China were off 4.1 cents today to $9.719, while June corn in Paris morning trade fell 6.2 cents to $6.419, after conversions to bushels and adjustments for currency valuations
Financial markets are mixed today, following a mix of international currents. Share prices fell in China on weak trade data and another move by the People's Bank to soften the Yuan, but stocks recovered in Europe. U.S. stock index futures are trying to hold on to Friday's gains, which were fueled by a better than expected jobs report for February. The China story appears to be hitting commodities, with both gold and crude oil softer today.
Bottom line: Rallies on international disputes rarely result in a sustained change to supply and demand fundamentals, but the bullish tone to the market should be respected. Keep selling old crop inventory and use the rally to make initial sales of 2014 production. Buying 85% of trend adjusted yield for Revenue Protection and participating in the new Agriculture Risk Coverage program should go a long ways towards guaranteeing a profit in the year ahead. For my analysis on using the new Farm Bill in your marketing plans, see this Special Report and the Weekly Corn Review. For specific recommendations and daily charts, subscribe to our free E-newsletter, Farm Futures Daily.
Soybeans are weaker on profit taking, following Friday's move to new contract highs by May futures. Traders are watching to see USDA's take on both South American production and U.S. ending stocks to judge if the winter rally has legs.
While USDA could easily be justified knocking 10 to 20 million bushels off U.S. carryout due to strong exports, the agency has seemed hesitant to drop its estimate below 150 million bushels. A reduction in the size of the crop in South America seems more likely, with output down around 150 million bushels.
Rains could linger in southern Brazil this week, improving moisture but also delaying early harvest, while conditions improve for cutting in areas to the north. Argentina could get socked by more heavy rains by Thursday, which could raise more fears of flooding there.
Big speculators trimmed some of their big bullish bet in beans last week, knocking 2,117 contracts off their net long positions, according to the CFTC report. Hedges funds were buying back soybean oil sales, helping extend gains there.
Daily volume in soybeans on Friday rose 42% on the rally to 224,385, though open interest was off 4,602 despite fairly active fund buying. There were no new soybean contracts registered for delivery Friday, and no deliveries today either. Soybean oil deliveries fell to 200 lots today, while no soybean meal was delivered.
Oilseed markets around the world today were mixed, with some profit taking noted after the recent rally. Still, May futures for Malaysian palm oil were higher at 40.2 cents/lb though soybean oil for May delivery in China eased to 52.1 cents. May soybeans in China fell 26.2 cents to $20.835, May rapeseed in Europe was up 4.7 cents to $13.003, and May canola in Winnipeg was 3.3 cents higher at $9.221. Note: prices are in bushel or pound equivalents including currency adjustments to U.S. dollars for contracts with significant volume.
Bottom line: Growers should be down to very small amounts of gambling stocks of 2013 inventory they intend to hold for a late spring and summer rally. Focus on getting 35% of new crop priced by the first week of April, and consider buying 85% of trend adjusted yield for Revenue Protection. Agriculture Risk Coverage should provide the rest of the safety net for 2014. For more information, see the Weekly Soybean Review. For specific recommendations and daily charts, subscribe to our free E-newsletter, Farm Futures Daily.
Wheat prices are lower at all three exchanges this morning, pulling back from last week's sharp rally. While traders expect USDA to make a modest increase to its estimate of carryout this morning, the agency may sit on its hands until the impact of events in Ukraine becomes more clear.
Besides, with the old crop selling season winding down, attention is turning to new crop
Another storm is moving across the eastern Midwest this morning, with heaviest accumulations south of a line from Kansas City to Toledo, according to today's seven-day coverage maps. Most areas should get at least a little precipitation over the next week, though totals look light for hard red winter wheat. Official 6- to 10 and 8- to 14-day forecasts out yesterday show above normal precipitation spreading across the northern Plains, though the latest American Model put out before 6 a.m. this morning is a tad lighter for the central and southern Plains over the next two weeks.
Elsewhere around the world today, Ukraine turns drier this week, though fields in South Russia have better chances for precipitation. China's main central winter wheat belt looks mostly dry for the next two weeks, while the forecast for Australia is dry through the end of the week.
Selling in Asian screen trade intensified on the open in Europe. Futures on milling quality wheat for May delivery in Paris fell 10.5 cents to $7.862, while futures for eastern Australian wheat were at $7.878, after conversions to bushels and adjustments for currency valuations.
Friday's data from the CFTC continues to suggest the impact of short covering from big speculators drove the winter rally. Hedge funds cut another 15,063 contracts off their net short position in Chicago, while adding 4,762 to their modest net long position in Kansas City.
Total volume in Chicago was up by 62% Friday to 126,176, with open interest off 3,114 on light fund short covering. Volume in hard red winter wheat rose 64% to 21,622, though open interest was lower by 605. There again were no deliveries today in hard red winter wheat but 26 lots did hit the street in Chicago along with 6 contracts in Minneapolis.
Bottom line: This could be another Chernobyl rally for wheat, though the market may be in the process of forming a long-term bottom. Use rallies to keep pricing 2014 winter wheat bushels, with Revenue Protection as a back stop. For more details on the outlook, see the Weekly Wheat Review. For specific recommendations and daily charts, subscribe to our free E-newsletter, Farm Futures Daily.
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This information is not to be construed as an offer to sell or a solicitation or an offer to buy the commodities herein named. The factual information of this report has been obtained from sources believed to be reliable, but is not necessarily all-inclusive and is not guaranteed as to the accuracy, and is not to be construed as representation. The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results.