March 7, 2014
Morning Price Trends
Corn: Up 3 to 8
Soybeans: Up 9 to 20
Wheat: Up 9 to 15
Grain futures are on a tear this morning, posting new rally highs across the board on encouraging export news and concerns about the Ukraine crisis. The dollar is also sharply lower, ahead of this morning's February jobs report.
Corn prices jumped to their highest level since Labor Day, sending May futures above $5. Futures got a lift from the get-go overnight on follow-though buying, then added to gains when trading started in Europe.
Spillover buying from soybeans helped, but the market also got a lift from a strong Export Sales report on Thursday. USDA put total new bookings at 66.2 million bushels, including almost 60 million bushels of 2013 inventory.
The new sales increase total commitments to 93% of the government's 1.6 billion bushel forecast for the entire marketing year, which still has six months left. Still, it's unclear whether USDA will raise its forecast again. Shipments are beginning to pick up but remain behind normal levels. And uncertainty over movement out of Ukraine could also stay the agency's hand.
Buyers, by contrast, appear to be taking no chances that the flow out of the Black Sea could be disrupted, sending prices higher internationally. Futures for May delivery on the Dalian exchange in China gained 3.3 cents to $9.788, while June corn in Paris morning trade was up 8.8 cents to $6.542, after conversions to bushels and adjustments for currency valuations
Funds were active buyers yesterday, with big speculators beginning to build a bullish bet in corn. Though the preliminary report from the CBOT showed total daily volume down 17% to 322,915, open interest rose 16,092. There were just 3 lots delivered today against March futures after a surge of grain was put out yesterday.
Financial markets are bracing their own data dump today. Investors expect the February employment report will show around 140,000 jobs created last month, though uncertain is high due to effects of the harsh winter. The dollar isn't waiting for the news, weakening sharply after the European Central Bank yesterday indicated it would take no action to stimulate the region's economy, easing the threat of financial easing there. Gold and crude oil aren't moving much on the currency trade, however.
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 making new highs as the overnight trade begins to wind down, with traders wondering whether USDA will finally be forced to tighten its projection of carryout in Monday's monthly supply and demand report.
Traders are looking for a 10 million bushel cut due to stronger exports, and Thursday's export sales data suggests an even larger reduction may be justified. While almost 10 million bushels of cancellations from China were included, net new bookings of old crop still hit 28.4 million bushels. That helped total outstanding sales and shipments already on the books top USDA existing forecast by 7%, with six months left in the marketing year.
Slow sales out of Brazil is making end users nervous, turning demand back to the U.S. Harvest delays caused by heavy rains n the big center-west region have sales there 10% slower than normal, and production may be cut in the south after dry conditions. Forecasts show rains persisting in Brazil with some concerns over potential flooding from heavy rains into next week in Argentina as well.
Daily volume in soybeans fell by 14% Thursday to 157,486, with open interest up 4,781 on only modestly active fund buying. There were no new soybean contracts registered for delivery Wednesday, and no deliveries today either. Soybean oil deliveries rose to 439 lots today, while no soybean meal was delivered.
Oilseed markets around the world today were stronger, with concerns over dry conditions for palm oil producers in Asia adding to the soybean rally and boosting oil's share of the crush margin. May futures for Malaysian palm oil rose to 40.2 cents/lb, while soybean oil for May delivery in China was up almost a penny to 52.4 cents. May soybeans in China gained 4.9 cents to $21.117, May rapeseed in Europe was 9.5cents higher at $13.147, and May canola in Winnipeg was up 4.3 cents overnight at $9.48. 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 posting double digit gains this morning on persisting tensions over Russia's move into the Crimea. Though shipments have yet to be disrupted, buyers are nervous about booking any new deals with boots on the ground and the war of words beginning to heat up again.
While the trade expects USDA to make a small increase to its forecast of carryout in Monday's report, the uncertainty over the Black Sea could keep any changes off the table for now, despite a slowing pace of export sales. Net new bookings of old crop in the latest week were 20.4 million bushels, not bad, but shipments were below the rate forecast by USDA for the final three months of the marketing year.
Weather is also beginning to become more important as the winter wheat crop emerges from dormancy. Hard red winter wheat fields will pick up a little moisture according to today's seven-day coverage maps, with official 6- to 10 and 8- to 14-day forecasts out yesterday showing above normal totals in much of Texas and the Oklahoma Panhandle. However, the latest American Model put out before 6 a.m. this morning is trending drier for the western Plains over the next two weeks.
Elsewhere around the world today, South Russia and Ukraine also appear to be trending drier, while China's main central winter wheat belt picks up a little rain today. Showers look limited in Australia over the next week, with more concerns raised about El Nino developing this summer.
Prices around the world today are stronger. Futures on milling quality wheat for May delivery in Paris rallied 16.7 cents to $8.03, while futures for eastern Australian wheat were at $7.861, after conversions to bushels and adjustments for currency valuations.
Total volume in Chicago fell another 4% Thursday to 78,119, with open interest up 550 on light fund buying. Volume in hard red winter wheat was steady at 13,216, while open interest gained 315. There again were no deliveries today in hard red winter winter wheat but 30 lots did hit the street in Chicago along with 1 contract in Minneapolis.
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
Want to receive market commentary by e-mail twice each day? This service includes added information, charts and graphs to explain market trends, and more. Sign up for the FREE service today - just click HERE
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.