March 11, 2014
Morning Price Trends
Corn: Down 1
Wheat: Mostly steady
Grain futures are mixed this morning, trying to overcome a weaker tone after attempts to rally prices ran out of steam in the overnight session. Watch out for follow-through selling on the heels of Monday's USDA Supply and Demand reports, which could threaten key chart support levels.
Corn prices are modestly lower, with May futures unable to hold a move overnight back above its 200-day moving average. That could encourage more profit taking from funds, which started buying aggressively the past couple of weeks but were unable to drive the market through upside resistance above the $5 level.
Prices broke Monday despite a USDA that modestly exceeded expectations. The government cut its forecast of 2013 crop carryout by 25 million bushels due to stronger exports, but still left Aug. 31 stocks near a burdensome 1.5 billion bushels.
While sales picked up this winter, shipments lagged, the only question mark on the export sheet right now. Monday's Export Inspections, released before the USDA reports, were in line with trade guesses at 36.8 million bushels. That topped the rate forecast by USDA for the rest of the marketing year, but year-to-date totals are up only 97%, while USDA sees sales gaining 125% for the full crop year.
Trading activity also thinned out yesterday. The preliminary report from the CBOT showed total daily volume down 21% at 310,177, while open interest fell 1,331 despite heavy fund selling. There were 2 lots delivered today against March futures, which go off the board at the end of the week with 2,879 contracts still in play, down 893 on Monday.
South Korea is tendering for 2.4 million bushels of corn, but the deal can be sourced from all over the world. Corn from South America or Ukraine looks cheaper than originations out of the Gulf, but it's unclear whether shipping questions could make either of those sources available for May slots.
International markets are mixed. Futures for May delivery on the Dalian exchange in China gained 2.1 cents to $9.733, while June corn in Paris morning trade was off 1.8 cents at $6.395, after conversions to bushels and adjustments for currency valuations.
Financial markets remain cautious, with gains in Asia reversing yesterday's losses but selling in Europe emerging overnight. Concerns over tensions in Ukraine continue to keep investors on the sidelines, with safe haven plays all a little stronger today, including the dollar, crude oil, gold and bonds.
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 softer after a rebound attempt fell apart early in European trading. Selling took May futures below the trendline support that's held the market rising in February and March, which comes in around $14.15 today.
Prices were already under pressure Monday before USDA cut its forecast of 2013 crop ending stocks by only 5 million bushels, less than the trade expected. While the government raised its forecast of marketing year exports by 20 million bushels, to a record 1.53 billion, that improvement was mostly offset by increased imports and reduced crush, putting projected Aug. 31 inventories at 145 million bushels.
USDA also made only minor adjustments to South American production, trimming the crop in Brazil by just 55 million bushels and making no changes to Argentina.
Rains are moving through southern Brazil today, but harvest there is past the halfway mark, so precipitation now won't help yields. Heavy rains were seen in parts of Argentina yesterday, but the outlook there is dry until the end of the week.
Export inspections topped trade guesses yesterday at 39.7 million bushels, though the total was reduced due to a clerical error. China accounted for 54.4% of the week's export inspections, which took the year-to-date total 7% higher than the increase forecast by USDA for the marketing year.
Daily volume in soybeans was steady at 223,638, while open interest rose by 4,218 on active fund selling.
There were no new soybean contracts registered for delivery Monday, and 12 were put out today. Soybean oil deliveries fell to 89 lots today, while no soybean meal was delivered. There are 1,505 March contracts still open, down 1621 yesterday.
Oilseed markets around the world today are mixed. May futures for Malaysian palm oil fell almost a half cent to 39.7 cents/lb, but soybean oil for May delivery in China gained close to a penny to 52.5 cents. May soybeans in China rose 10.6 cents to $21.03, May rapeseed in Europe was flat at $12.839, and May canola in Winnipeg was off a penny to $9.041. 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 trying to turn higher this morning, with a battle on the charts underway. While Chicago May failed to take out its 200-day moving average last week it held chart support at its old channel resistance so far today at $6.365. KC May meanwhile held its 200-day moving average around $7.085 today.
USDA made no changes to its forecast for U.S. old crop ending stocks in Monday's report, in line with our expectation due to uncertainty over how Ukraine will impact sales this spring. Export inspections at 15.8 million bushels were below trade guesses and the rate forecast by USDA for the last quarter of the marketing year. Year-to-date inspections are still running 3% higher than the government's projection, but that cushion is slipping.
Demand so far this week is routine. Japan seeks to spit its regular weekly tender between the U.S., Canada and Australia, with bids for U.S. sources accounting for 43% of the 4.7 million bushels sought.
Updated crop ratings put out by Kansas, Oklahoma and Texas were mixed but overall added about a quarter a bushel to yield potential to the hard red winter wheat crop. Storms this morning bring precipitation to the northern Plains, but today's seven-day coverage maps keeps moisture limited for hard red winter wheat. Official 6- to 10 and 8- to 14-day forecasts out yesterday are cold and dry for the crop, but the latest American Model put out before 6 a.m. this morning turned wetter.
Elsewhere around the world today, South Russia is seeing some rain today, while Ukraine looks dry for the next week. China's main central winter wheat belt looks dry this week, with a few showers next week for western and southern areas. Australia is getting some light showers in the southeast today though other wheat-growing areas on the continent may receive only light coverage during the next week.
Overseas markets were mixed. Futures on milling quality wheat for May delivery in Paris fell 2.5 cents to $7.761, and futures for eastern Australian wheat were at $7.86, after conversions to bushels and adjustments for currency valuations.
Total volume in Chicago fell by 31% on Monday to 86,826, though open interest was off just 163 despite fairly active fund selling. Volume in hard red winter wheat was down by a third at 14,173, with open interest gaining 220. There again were no deliveries today in either March winter wheat contract or in Minneapolis, where March closed 11.75 cents premium May. Only 96 Chicago March and 81 KC March are still open.
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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