March 12, 2014
Morning Price Trends
Corn: Down 1 to 2
Soybeans: Down 10 to 35
Wheat: Up 1 to 3
Grain futures are decidedly mixed this morning, as the crisis in Crimea and Ukraine drives a wedge in the market. Assets that could be helped by the dispute are gaining, while most others are in retreat as investors around the world seek safe havens.
Corn prices are modestly lower, after trying to follow wheat higher overnight. May reversed higher yesterday and is fighting to hold support at its 200-day moving average again today, which comes in around $4.7825. Futures got a little support from the Black Sea crisis; Ukraine was expected to account for 16% of global corn exports during the 2013-14 crop marketing year.
Ethanol production reported this morning was likely supported last week by good processor margins, after falling a little the previous period. Otherwise, demand news is light. South Korea rejected offers in a tender for 2.4 million bushels of optional origin corn yesterday.
The preliminary report from the CBOT showed total daily volume down 10% Tuesday to 280,549, while open interest rose 8,989 on moderately active fund buying. There were 2 lots delivered today again against March futures, which go off the board at the end of the week with 1,938 contracts still in play, down 941 on Tuesday.
International markets are stronger today. Futures for May delivery on the Dalian exchange in China rose 4.1 cents to $9.742 and June corn in Paris morning trade was up 3.5 cents to $6.491, after conversions to bushels and adjustments for currency valuations.
Financial markets show divergence along a fault line from the Ukraine crisis. Stocks sold off sharply around the world as investors shed risky assets, boosting safe havens like the dollar, gold and bonds. Crude oil broke again overnight after falling below $100 Tuesday. This morning's Petroleum Inventory could show distillate supplies, including diesel, falling on heating fuel demand, though crude oil stocks likely built substantially.
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 more, see my Weekly Corn Review. For specific recommendations and daily charts, subscribe to our free E-newsletter, Farm Futures Daily.
Soybeans are seeing heavy selling this morning, with follow through weakness emerging after Tuesday's close below the trendline marking the market's rally in February and March. May futures gapped lower on the open of the overnight trade, with losses accelerating as other markets around the world tumbled on the Ukraine crisis. Soybeans showed a strong correlation to stocks over the past month. The first level of chart support comes in around $13.80 on the May.
While rains continued to fall yesterday in the center-west of Brazil, southern areas into Argentina are drying out until a new system moves through the region later in the week. Rains cause harvest delays now but provide moisture in Brazil for the second crop.
Daily volume in soybeans was off 8% to 205,056 yesterday, with open interest up 7,670 on modest fund selling. There were no new soybean contracts registered for delivery Tuesday, but 44 were put out today as cash bids along the Illinois River were mostly below the board amid high barge freight costs. Soybean oil deliveries fell to 22 lots today, while no soybean meal was delivered. There are 1,008 March contracts still open, down 497 yesterday.
Oilseed markets around the world today are mixed as the complex generally follows outside markets. May futures for Malaysian palm oil were down three-quarters of a cent to 38.9 cents/lb while soybean oil for May delivery in China was flat at 52 cents. May soybeans in China gained 5.3 cents to $20.955, May rapeseed in Europe fell 10.2 cents to $12.80, and May canola in Winnipeg was down 13 overnight at $9.065. 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 stronger this morning, building on Tuesday's rally. Prices took off yesterday on reports no crops would be planted this spring in Crimea, though that contested region only plants winter wheat. Chicago May continues to test its 200-day moving average, which is around $6.635 today. Morocco reportedly bought almost 15 million bushels of wheat last week, some of from Ukraine and Russia, trying to beat any disruptions from the conflict.
Weather is also providing some support this morning, because today's seven-day coverage maps show only light precipitation for hard red winter wheat fields. Official 6- to 10 and 8- to 14-day forecasts out yesterday remain mostly dry for the southern Plains, while the latest American Model put out before 6 a.m. this morning trends drier for the western Plains too.
Elsewhere around the world, showers are winding down in South Russia but that part of the region along with Ukraine look dry into early next week, when chances for more precipitation improve. China's main central winter wheat belt could be dry for the next two weeks, while only light precipitation is forecast for Australia into next week. China continues to sell wheat from its reserves, though demand was down for this week's auction.
Overseas markets were posting modest gains today. Futures on milling quality wheat for May delivery in Paris rose 2.4 cents to $7.973, while futures for eastern Australian wheat were at $7.78, after conversions to bushels and adjustments for currency valuations.
Total volume in Chicago rose 28% on Tuesday to 110,720, with open interest up just 826 on active fund short covering. Volume in hard red winter wheat was up 95% to 27,606, on a drop in open interest of 1,038. There again were no deliveries today in either March winter wheat contract but four new deliveries were made in Minneapolis. Only 118 Chicago March are open, but that rose 22 yesterday. There are only 48 KC March in play, down 33 Tuesday.
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.