March 29, 2012
By: Craig Haugaard, Grain Origination Manager
CORN: 5 lower
All I can say is thank God that the Chinese showed up yesterday. An announcement came out that they had purchased six cargoes of corn for May and June shipment. This old crop sale was somewhat unexpected and one wonders how much corn futures would have fallen yesterday if not for hits shot of positive news. As it was we saw plenty of pre-report profit taking with the funds dumping 20,000 contracts yesterday. This drove the May futures to the lowest point they have seen since January 23rd while the December futures hit a level last visited on November 25th of last year. It wasn’t just fund managers that were pulling the trigger as we saw a lot of cash corn being sold all across the fruited plains. From what I was told it appears as if a number of marketing advisors had producers pulling the trigger and with May futures having fallen from a high of $6.75 ¾ on March 19 to a low of $6.19 yesterday that sounds about like the right timing. At the end of the day the fears remain the same. Early planting and huge acres with a trend line yield crop and we are so freakin far underground you have truck in sunshine. It is interesting to look at the last year we had a rapid planting pace, 2010. That year we had 81% of the crop planted nationwide on the week of May 9th. That year we had 27% of the crop, 3.36 billion bushels, harvested as of the week of September 26th. You can contrast that to last year where we had 40% of the crop planted as of the week of May 9th and only 15%, 1.853 billion bushels, harvested as of the week of September 25th. To me this should be a cautionary tale to those who believe we are going to “run out of” corn this summer and push the old crop price dramatically higher. I suspect that we have enough corn to make it to harvest, especially if we have an early plant/harvest. Heck, the July futures are trading at about a $0.58/bu premium to the September futures which kind of tells me the trade is expecting an early harvest and the bids are reflecting that.
Technically not much has changed. My technical signals have all been in sell mode for some time now and since we had the key reversal, as noted in the March 20 opening comments, the market has dropped from a close of $6.63 ½ on March 19th to the $6.20 ¼ that we posted yesterday. We should find some support in the May futures at $6.12 and if that fails to hold $5.70 becomes the next line in the sand.
SOYBEANS: 3 higher
In spite of the market being down a little bit yesterday I find myself breaking into joyous song whenever I think of the bean market these days.
South American drought, lifting me higher
Than I've ever been lifted before
So keep it up
Grant my desire
And I'll be at your side, forever more
Now once, I was down hearted
Low prices, was my closest friend
But then you, came and they soon departed
And you know we never saw low prices again
I'm so glad, I've finally found you
Yes that one, in a million rallies
And you whip, your bullish hooves around me
I can stand up, and face the world
You know the game, a SDWG cap to the first person who can tell me the name of the song I am ripping off.
Anyway, beans really hung in pretty well in light of the old fashioned butt kicking that corn and wheat took yesterday. The main reason for that seems to be the ongoing reduction in the size of the South American crop by private analysts. We had an analyst yesterday project that the crop in Argentina is actually 42.6 MMT which is darn near 4 MMT less than what the USDA gave us to play within their March report. Other traders are telling me that they believe we could see the combined crop in Brazil and Argentina ultimately come in 6 MMT less than the USDA’s March number. I sure hope they are right so that I don’t have to do the Speedo saunter down the main street of all the towns that we have grain facilities in. If the private’s are correct then it would stand to make sense that we will have to see the new crop price go to a level where some price rationing will occur. I don’t know where that level would be but I happen to believe that it will be at a price level higher than where we are today. The one thing that we could do if we take the price higher enough is encourage more double cropping of beans. Last year we had 5 million double cropped acres while the high water mark came in 2008 when we had 7 million acres of double crop. That is going to be interesting to watch this year but may be a part of the solution to what appears to be a looming bean shortage.
Having said all of that I must report that my technical indicators all turned negative in the November futures based on yesterday’s close so if you are selling based on technical indicators you would pull the trigger on part of your expected production this morning.
WHEAT: 2 lower
Great winter wheat conditions in the USA and a softer market in Europe set the stage for a sell-off in wheat yesterday. In looking at weather forecasts around the world it looks dry in Europe for the next ten days or so while in China the wheat growing region looks dry for the next ten days as well. In terms of threats to the wheat in this country I continue to see the possibility for a frost in winter wheat country post Easter but barring that I suspect that the path of least resistance is lower.
Technically, we are still in the sideways trading range that we have been in for months and I continue to believe that when we eventually break out of this pattern we will break to the downside.
The information contained above was taken from sources which Wheat Growers believe to be reliable, but is not guaranteed by Wheat Growers as to accuracy or completeness and is made available for information purposes only. There is a risk of loss when trading commodity futures and options.