March 6, 2014
Morning Price Trends
Corn: Down 2
Soybeans: Up 4 to 7
Wheat: Down 1 to 4
Grain futures are mixed this morning, with traders watching the latest moves in the Crimea, along with weather and export news ahead of Monday's monthly production, supply and demand report from USDA.
Corn prices are a little softer on light follow-through selling on the heels of Wednesday's small reversal lower. May futures fights to hold its 200-day moving average for support, which comes in around $4.795 today.
While traders wait to see if the Ukraine crisis has any impact on that country's corn sales, more immediate news moves front and center. Ethanol production reported Wednesday fell 11,000 barrels a day but remains good, with year-to-date output around 11% higher than seen for the 2012 crop. Export Sales totals for last week are expected to be steady around 32.5 million bushels. The weaker sales tone over the winter suggests USDA may be too high with its forecast by around 25 million bushels, but the agency may be hesitant to changes its prediction due to uncertainty out of the Black Sea, where farmers are hoarding grain in the face of currency devaluation.
The preliminary report from the CBOT showed total daily volume steady at 387,520 contracts on Wednesday. Open interest fell 9,883 on fund selling. There were 225 lots delivered today against March futures, with a big stopper taking most of them. That corn is in Burns Harbor, IN, where it is out of positions for exports right now.
Overseas markets today are weaker. Futures for May delivery on the Dalian exchange in China eased 1.7 cents to $9.771, while June corn in Paris morning trade was off 3.5 cents to $6.353, after conversions to bushels and adjustments for currency valuations
Financial are fairly quiet, with U.S. stock index futures trying to turn around yesterday's modest losses. Weak economic data Wednesday put a damper on buying, with investors waiting for Friday's employment report for guidance, though disruptions caused by the frigid winter may mute any impact. Some 140,000 jobs may have been added to payrolls last month.
The dollar is weaker on the more upbeat tone, but gold and crude oil are easing again. Wednesday's Petroleum Inventory showed a build in stocks of USLD, with diesel prices finally easing at the wholesale level. For more on spring buying strategies, see my Weekly Energy Review.
Bottom line: Rallies on international disputes rarely result in a change to supply and demand fundamentals so this is a selling opportunity, especially with 2014 crop prices above the Revenue Protection guarantee. Use rallies to keep selling out inventory and turn sights to 2014, planning to buy 85% of trend adjusted yield for Revenue Protection. The new Agriculture Risk Coverage feature to the farm bill should mitigate some of the downside for 2014. 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 higher this morning, with steady gains overnight building on Wednesday's rally and keeping the market overbought. November futures moved to its highest level since October, beginning to target resistance above $12.
Prices were able to turn around yesterday from news China cancelled 9 million bushels of previous purchases, which was reported under USDA'S daily reporting system. Weekly export sales out this morning are expected to run around 35.8 million bushels, keeping pressure on the government to raise its forecast of shipments for the marketing year, lowering ending stocks. Agency economists have been loath to cut carryout projections below 150 million bushels this year.
Rains remain a good news/bad news story that's tilting bullish in South America today. Storms are moving out of dry areas on southern Brazil that needed moisture, but daily rains in the key center west should continue to cause harvest delays. More heavy rains are forecast for later this week in Argentina, which could revive flooding fears there as well.
Daily volume in soybeans rose by 23% yesterday to 182,537, though open interest fell by 8,023 on flat trade from funds. There were no new soybean contracts registered for delivery Wednesday, and no deliveries today either. Soybean oil deliveries were down to 213 lots today, while only one lot of soybean meal was again delivered.
Oilseed markets around the world today are higher. May futures for Malaysian palm oil rose a half-cent to 39.9 cents/lb on concerns about lost production from drought, while soybean oil for May delivery in China was higher at 51.9 cents. May soybeans in China were up 3.6 cents to $21.121, May rapeseed in Europe gained another 9.4 cents to $12.778, and May canola in Winnipeg overnight was steady at $9.354. 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 mostly weaker today, with chart resistance capping the rally. Ukraine hasn't been involved with many tenders this winter, muting the crisis impact though concerns about the 2014 crop remain.
Regular customers continue to extend coverage of U.S. purchases. Taiwan bought 3.1 million bushels and Japan filled 45% of its regular weekly tender for 4.1 million bushels with U.S. originations, the rest taken by Canada.
Export sales out this morning could be off a little, falling below 20 million bushels, as buyers' interest begins to turn to new crop. A couple more storms are expected to bring light precipitation to winter wheat fields over the next week, according to today's seven-day coverage maps. The official 6- to 10 and 8- to 14-day forecasts out yesterday continue to show below normal temperatures for soft red winter wheat and the eastern Plains, shifting drier for hard red winter wheat. The latest American Model put out before 6 a.m. this morning reinforces the drier trend, but still has some precipitation for the far western Plains in the two-week outlook.
Elsewhere around the world today, South Russia appears to be shifting drier, though Ukraine is getting some precipitation today. China's main central winter wheat belt also looks drier, with the outlook showing little additional rain over Australia in the coming week as well.
Prices around the world today are weaker. Futures on milling quality wheat for May delivery in Paris fell 3.7 cents to $7.644, while futures for eastern Australian wheat were at $7.80, after conversions to bushels and adjustments for currency valuations.
Total volume in Chicago fell another 22% yesterday to 80,961, while open interest fell 2,090 on light fund selling. Volume in hard red winter wheat was off 30% to 13,153, though open interest gained 405. There again were no deliveries today of winter wheat but 107 contracts were put out in Minneapolis, all but one of them redelivered.
Bottom line: This could be another Chernobyl rally for wheat. Use it to keep pricing 2014 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.