EHedger Afternoon Grain Commentary 3/11/13
Mar 11, 2013
Front month corn and soybeans closed higher to start the week following Friday’s WASDE report and more concerns over South American logistical problems.
May corn closed up 7 ¾ cents at $7.11 ¼ which is the highest it has settled in over a month. The next resistance levels come at $7.1925 and $7.2250 which is the 200 and 100 day moving averages (respectively).
May soybean’s settlement is also near the top end of the range at $14.79 ½. The next resistance point is at $14.97.
Fundamentally not much changed over the weekend. The USDA reported slightly higher export inspections for corn and wheat on this morning’s report but soybeans were under estimates. Nearby CIF basis was a few cents higher for soybeans and near unchanged for corn. We are focusing on wheat feeding and protection for new crop pricing. How much wheat is being fed that could ultimately help corn carryout? May wheat is 11 ¼ cents under May corn and the incentive is certainly there. We are also long term bearish new crop prices and want to sustainably protect our downside price-risk as we get past the acreage report and spring planting. We still have the large South American production that may hold our old crop prices range-bound.
MARCH USDA REPORT COMMENTS
The Supply and Demand report didn’t provide any monumental changes. Although corn carryout was left untouched at 632 million bushels it was still slightly less than the average analyst estimate of 650 million which helped support the front month contracts. They reduced corn exports by 75 million bushels, raised imports by 25 million bushels and raised feed use by 100 million. Wheat carryout was higher than expected at 716 million after the USDA lowered export demand by 25 million. Soybean carryout was left unchanged in the US at 125 million bushels.
The USDA made minimal changes to their South American projections as well. They have Argentine soybean production at 51.5 (down 1.5) and Argentine corn production at 26.5 (down 0.5). Brazilian bean production was estimated at 83.5 (unchanged) and their corn production was 72.5 (unchanged). The main divergence from market expectations was that the USDA was more conservative on lowering Argentine production than the private estimates continue to roll in at.
The bottom line is this report wasn’t a major game-changer for grains but we do have some major reports on the horizon that might be. On Thursday, March 28th we will have the Quarterly Stocks Report as well as the Planting Intensions report. The corn-to-soybean ratio has been slowly trending higher since the beginning of the year which could mean soybeans get more acres than early estimates were calling for. On Friday and Monday new crop corn outpaced new crop soybeans which made sense since the price-ratio has rallied sharply since the beginning of December and was probably "due" for a market correction.
Corn-Soybean Ratio 2013
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