Friday AM Grain Update
Nov 30, 2012
Soybeans are leading the grain complex lower this morning after a poor technical performance on Wednesday and Thursday. The January soybean contract was unable to hold a rally above $14.50 for two consecutive days, a red flag for traders who have found little in the means of fundamentals news and are relying on charts for direction. Yesterday’s highs in the January contract correspond with the 200-day moving average, which is watched heavily by the fund community for trend changes. Yesterday’s highs in the March corn contract correspond with the 100-day moving average. As with beans, poor technical closes the last 2 days has likely encourage some speculative selling. Yesterday’s Export Sales report from the USDA came in below expectations across the board and may have had something to do with the weakness. Cumulative corn sales for the 12/13 marketing year stand at 42% of the USDA’s current forecast vs. 49% on average. We’ll need to sell 421,000mt each week to meet the USDA’s current forecast. Cumulative soybean sales stand at 75% of the current USDA forecast vs. 61% on average. Only 229,000mt need to be sold each week to meet current USDA forecasts. Many anticipate a heavy shift towards South American beans rather than US beans after the Brazil/Argentina harvest this spring.
The International Grain Council increased their worldwide soybean production estimate for the 12/13 crop year, which includes the South American crop to be harvested in the spring. The estimate came in at 267mmt, up 12% on the year. The council is obviously assuming a big crop from South America. Brazilian soybean could be up 25% or more according to some analysts, as last year was seen as a crop failure.
The USDA is estimate the value of Ag exports in the 2013 fiscal year at $22.3 billion up from 2012’s $19.8 billion. In August, the USDA forecasted 2013 exports at $19.9 billion. Unstoppable China soybean demand is likely one of the bigger reasons for the increase.
Argentina soybean planting is 45.2% complete up from 37% last week, according to the Buenos Aires Grain Exchange. Corn planting is 52.4% complete vs. 50% last week. Wheat harvest in Argentina is 25.7% complete.
Hog producers should note that both the December and February contracts posted minor chart reversals yesterday. Spread action was poor as well. It looks as if some follow-throughs selling will be seen early this morning. The futures’ premium to cash narrowed yesterday slightly. The cash index and the nearby futures will converge ahead of contract expiration.
Outside markets are quiet this morning. Equities are near unchanged while crude oil is marginally lower. The bond market continues its march higher and looks poised to test the recent highs above 152’0 in the December contract. It seems as if the Democrats and Republicans are again at a stand-still regarding the so-called "fiscal cliff." The GOP is far more adverse to raising taxes while the Democrats seem set on raising taxes on those earning over $250,000/year. As of now, everything is up for negotiation. Capital gains tax, the mortgage tax deduction and loopholes used by businesses are all being discussed.
Today is first notice day for all December grain contracts. Positions should have been liquidated yesterday. Personal Income data will be released at 7:30am CST. Chicago PMI at 9:00am CST.
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