Grains Bounce Overnight
May 15, 2012
· Grain markets rally overnight; Technical bounce seen in beans while corn seems to have found some footing near current levels; Dec corn reluctant to move below $5 until we know more about the crop
· Crop scout Cordonnier increased estimate for Brazil corn to 64.0mmt, up from previous 62.0mmt; All other SAM estimates left unchanged
· Some traders discussing dryness in western wheat areas
· Corn planting 87% complete (71% last week, 66% avg) according to USDA crop progress report yesterday; Soybean planting 46% complete (24% last week, 24% avg); Spring wheat 94% complete (84% last week, 64% avg); Winter wheat rated 60% good-excellent (63% last week, 47% avg)
· Brazil grain analysts Celeres estimates soybean harvest at 99.5% complete; The group estimates that farmers have sold 83% of the crop vs. 80% last week and 63% on average
· Rabobank issuing report indicating that China hog and pork prices will likely fall as much as 20% this summer vs. last summer
· CME Group scheduled to begin 22 hour grain trade on May 21st; Several industry groups and traders have urged CFTC to delay the expansion of hours
· ICE exchange began trading grain contracts on Sunday night; Volumes were very low in corn, soybeans and wheat
· Export Sales on Thursday morning; USDA June Crop Production on 6/12; Acreage and Quarterly Stocks on 6/29
· Outside markets mostly quiet today, equities marginally higher with crude, gold and currencies near unch
We believe that upside in old crop corn is possible given recent flush out of longs. The bulls have been defeated and their money has been taken. Tightness in the cash market and phenomenally strong basis levels continue. Spreads remain inverted despite trading well removed from recent highs. New crop corn’s best chance for a move higher, barring a weather event, may be a push from old crop contracts. The average farmer is undersold from what we can gather, and selling opportunities may be few and far between.
Look to sell rallies in soybeans. We believe that further spec liquidation is in order. Balance sheets will likely change drastically in coming reports due to price moves.
As always, call the office with questions or concerns.