Tim Hannagan's Weekly Grain Report for February 20, 2014
Feb 20, 2014
This is Tim Hannagan it is Thursday February 20th. Corn gains on the month are marginal at 25 cents. Most of the gains came from short covering. Trend following funds were short 142 thousand contracts three weeks ago and now just 36 thousand. This leaves some longs with profits to take them due to month end profit taking. Should we get some month end balancing I am looking for corn to not break below 4.50 basis May futures. The USDA AG Forum Outlook, which gives thoughts prior to the March 28th planting intention report, suggested corn acres to be planted at 92 million acres vs. 95.4 last year. This will support corn into the March 10 USDA monthly crop report and the March 28 report on planted acreage. The perception will be acreage cuts will be greater March 28th, and we will get the third consecutive monthly decline in ending stocks on the March 10th report. We could see further gains up to 4.82 prior the report March 28. The May support lies at 4.58 then 4.50 with resistance 4.70 then 4.82.
Wheat gains of 50¢ this month continued off light buying by speculators and short covering. The three week’s prior, trend following funds were short 196 thousand contracts and entering this week just 80 thousand short. The buying and short covering all comes as traders don’t want to be short going into March when wheat breaks dormancy and speculators are buying off anticipation that the drought in the western wheat states will continue. Crop conditions are very low and will challenge the crop to find near perfect weather to catch up. Look for month end profit taking and if a pull back to the low 6.00 area is seen, be a buyer. May support is 6.00, resistance 6.18.
The soybeans 75¢ rally this month came on fund buying. Trend following funds enter the weeklong 154 thousand contracts up 35 thousand from the week prior. A month end profit taking break is next week’s risk. If it occurs we will test 13.25 and maybe 13.00 basis may. What continues to prop soybeans up is China’s buying of U.S. beans while waiting for Brazils harvest to pick up. Rains the next 10 days in central Brazil look to be 2 to 5 inches with 80% coverage. This lent to thinking of harvest delays and keeping the U.S. ports active and a new monthly price high this week. May support is 13.25 then 13.00 with resistance 13.50 then 14.00. I will expand in great detail on all these issues on Friday February 21 at 3:00 PM on my weekly webinar. Those interested, its free just go to the Walsh website at www.walshtrading.com or click on the signup link below.
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RISK DISCLOSURE: THERE IS A SUBSTANTIAL RISK OF LOSS IN FUTURES AND OPTIONS TRADING. THIS REPORT IS A SOLICITATION FOR ENTERING A DERIVATIVES TRANSACTION AND ALL TRANSACTIONS INCLUDE A SUBSTANTIAL RISK OF LOSS. THE USE OF A STOP-LOSS ORDER MAY NOT NECESSARILY LIMIT YOUR LOSS TO THE INTENDED AMOUNT. WHILE CURRENT EVENTS, MARKET ANNOUNCEMENTS AND SEASONAL FACTORS ARE TYPICALLY BUILT INTO FUTURES PRICES, A MOVEMENT IN THE CASH MARKET WOULD NOT NECESSARILY MOVE IN TANDEM WITH THE RELATED FUTURES AND OPTIONS CONTRACTS.