Jul 28, 2014
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March 2014 Archive for The Hueber Report

RSS By: Dan Hueber

The Hueber Report is a grain marketing advisory service and brokerage firm that places the highest importance on risk management and profitable farming.

March reports are finally behind us

Mar 31, 2014

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The much anticipated quarterly grain stocks and prospective planting reports have now been released and there is a little something for both the bull and the bear, but nothing outrageous in any category.  Beginning first with the stock figures; As of March 1st, wheat inventories are estimated at 1.055 billion bushels, which is a touch higher than the average trade estimate of 1.042.  The corn figures leaned to the positive side though with a figure of 7.055 billion bushels compared with the average trade estimate of 7.099.  This means that the usage for the past quarter was 3.45 billion bushels compared with the same period last year of 2.65.  These numbers would seem to jive with the Hog and Pigs report released last Friday and should dispel any ideas that this has not been a demand led rally in the corn market.  Soybean stocks were reported at 992.32 million bushels, which is a little more that 3 million above the average trade estimate of 989 million.  While not a huge variance from the trade guess, with the tight situation we have, all bushels help and could confirm that the crop was slightly understated. 

For acreage, beginning again with wheat, total acreage is projected to be 55.81 million acreage, which is less than 500k less than the average trade estimate of 56.278.  Corn acreage leaned just a touch to the friendly side coming in at 91.69 million compared with the average estimate of 92.75 million.  It stands to reason that the bean number came in a bit higher than expect and is projected to be 81.49 million compared with the average trade estimate of 81.07. 

Realistically, all of the numbers were well within the range of estimates and while we have seen the normal post report volatility nonsense, these should not be major market movers.  In my estimation the most friendly number in the group has to be the corn disappearance and the most unfriendly being the soybeans acreage.  Let’s keep on perspective, when it comes to acreage for both corn and beans, we have enough to potentially produce very large crops.  Now we can all look forward to the supply/demand reports that will be released on the 9th.  

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In memory of one of the giants of Agricuture

Mar 29, 2014

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There was an important century anniversary celebrated this past week, and outside of Agricultural publications I suspect it was missed by most of this nation. The 25th of March marked what would have been the 100th birthday of the biologist Dr. Norman Borlaug.  I believe you can tell much about a society by the "heroes" or role models that are lifted up. I suspect that if you queried a random sampling of citizens of this country, many would have heard about Kim and Kanye being displayed for all to see on the latest cover of Vogue or the most recent shock antics of Lady Gaga, but the name Borlaug would likely be greeted with a blank stare. This is very unfortunate.  We are talking about an individual who was awarded the Nobel Peace Prize (back when it actually meant you had accomplished something), the Presidential Medal of Honor, the Congressional Gold Medal and the Padma Vibhushan award, which is the second highest civilian award given in India.  Dr. Borlaug is often referred to as the father of the "Green Revolution" and between the 1940’s and 1960’s pioneered research in hybridization, cross breeding and modern farming techniques, and is credited with saving literally over a billion lives throughout the world. 

This is not to say that his birthday escaped unnoticed or without celebration.  In Washington, DC a statue of Dr. Borlaug was unveiled at the National Statuary Hall in the Capital.  The event was attended by leaders from both the House and Senate, members of the Borlaug family and of course many representatives from Iowa, where he was originally from. But somehow, this event seemed to miss the headline news in print or on television. 

This is unfortunate at so many levels.  As I touched on initially, it appears to be just another reflection of what our society values in our role models. But it is also indicative of the lack of understanding that much of our citizens have concerning where food comes from and the challenges that the world will confront as we march towards what is projected to be an increase of over 28% in population; between now and 2050 the population is projected to increase by another 2 billion to somewhere in the neighborhood of 9 billion people.  It is also indicative of the less than effective job that we in agriculture have done in educating people about the need for continued advances in the technology of farming, be that in genetics, the use of fertilizer and chemicals, or even water.  Companies like Chipotle can make a big PR splash and be hailed for taking a so-called ethical stand against big agri-business, but how many of their clients paying for overpriced burritos actually understands delicate balance that exists for many around the world between starvation and existence?  How many understand the economics of yield and the need to squeeze ever more quantity from a little amount of soil if there is any hope of keeping pace with demand?  Out of sight, out of mind and all the more reason that stories like that of Dr. Borlaug need to be impressed on those outside of agriculture to hopefully garner a little more understanding and even appreciation of what it takes to actually put food on tables throughout the world.  In a recent interview, Dr. Borlaug’s granddaughter Julie, who worked with him during his final years at Texas A&M, stated that agriculture has to confront the ignorance head-on that exists concerning production agriculture and the industry truly needs to come together to change that.  I particularly like her comment that "The reason that we have the lifestyles we have now is because of the advancements in agriculture in the past 100 years. We would not have the lifestyles, we wouldn’t have the education, all of that, if we hadn’t progressed like we have and come out of an agrarian system."   You really have to ask how many people actually know or understand this. More importantly, if they do not, why? 

So next time someone is commending some celebrity and the latest fad restaurant for their stand on "sustainable" agriculture and how it will make our lives "healthy and enlightened", invite them to really become enlightened and learn about someone who actually provided the gift of life for more than a billion people around the world.  Yet somehow I suspect that a picture of Dr. Borlaug will still not make it to the cover of Vogue.  www.worldfoodprize.org, www.borlaugleap.org.    

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Morning Comments - Full - Many questions should be answered on Monday

Mar 28, 2014

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Wheat

Fundamentals – The wheat market assumed the role of upside leader yesterday stimulated by concerns about Ukraine.  This time though, the concerns had nothing to do with Russia.  It turns out that currently Ukraine is dealing with the driest conditions since 1980 and on top of that a government representative reportedly commented that farmers are so cash strapped at this point that it could impact the amount of acres that go into production this year.  Interestingly enough, 90% of the wheat there is winter so planting issues technically should have impacted corn more that wheat.  Regardless, it provided the bulls with a little additional fodder as we await the reports next Monday. 

The average estimate for March 1st wheat inventory is 1.042 billion bushels with a range of 985 mil to 1.115 billion.  Stocks a year ago were 1.235 billion.  The average estimate for wheat acreage is 56.278 million acres with a range of 54.80 to 57.71.  Last year we planted 56.156.  Winter acreage is expected to be down 930k with spring up 998k. 

Technical – We have an interesting pattern here in the May wheat.  After posting an outside higher reversal on Monday, we back tracked for two days and then yesterday, posted another outside reversal higher, all the while remaining contained within Monday’s range.  This is understandably inconclusive action as much is riding on the Monday reports.  I continue to feel unless there is something surprisingly friendly, this market appears to be in line for a downward correction and in fact, could fail even on positive news.    

Corn

Fundamentals – It appeared that to a large extent the corn market was pulled around by wheat again yesterday but it is not that it did not have positive underlying news.  Export sales were solid and ethanol margins continue to shine but these are known inputs and as I have commented previously, we are going to need some additional positive news if prices have room to push higher out of this range, particularly with the South Hemisphere corn crop looking larger. 

We really have two reports to contend with over the next 2 trading days, the first of which will be the quarterly Hogs and Pigs to be issued this afternoon.  The current estimates have All Hogs at 94.5% of a year ago with a range of 92 to 97%.  Kept for Breeding at 99.6%, with a range of 98.9 to 100.7 and finally Kept for Market at 94% with a range of 91.2 to 96.9.

Looking out to Monday, the average estimate for March 1st inventory is 7.099 billion bushels, with a range of estimates between 6.861 to 7.54 billion.  A year ago we had 5.40 billion.  The average trade estimate stands at 92.75 million acres with a range of estimates between 90.5 and 94 million.  Last year we planted 95.37 million.  Lets keep in perspective that even if we come in at the average estimate it will be the 4th highest planted acreage number in recent history.  The next supply/demand report will not be released until the 9th.   

Technical – That was a solid rally in May corn yesterday and while we did not push into new highs, that was the highest close this contract has posted since the 11th of September.  I think it would be beneficial to look at the spot contract right now as we are within striking distance of the early March reaction high of 4.95.  With the overall action this month we have the appearance of a flat top with an ascending bottom and the old rule of thumb says to watch for a breakout to the flat side of such formations.  Of course those are guidelines only and unless we have a jolt of positive news come Monday, it may be tough to justify ideas of a push higher for now. I plan to sit on my hands until then.  

Soybeans

Fundamentals – It appeared that a few bean longs were ready to take money off the table yesterday but the selling has not really amount to much in the way of price action.  Sales were a marketing year low and small but when you are this far ahead of expectations with a tight situation, any are too many.

As I commented yesterday, there are a number of people in the trade questioning the accuracy of the estimates for this last crop feeling that with the availability of beans thus far, it may have been understated. The stocks report on Monday should provide the confirmation one way or another.  The average trade estimate stands at 989 million bushels with a range of estimates between 955 and 1.087 billion.  Needless to say, something north of a billion would really deflate the bull balloon.  The average estimate for beans stands at 81.07 million acres with a range of estimates between 78.5 to 83.6 million.  Last year we planted 76.53 million and the record acreage ever planted in the U.S. is 77.5 million. 

Technical – It would appear that May beans are poised to posted the 2nd higher week in a row but unless we reach up to close above 13.57 ¾, it will not be the highest daily or weekly close for this up-swing.  Here are well, we have a market with an apparent flat top at the 14.60 level but if we can actually push through that mark for a breakout higher is dependent on the news we hear on Monday so we need to be patient until then.  Of course, as with any report, the only thing that will really matter will be where we close for the session.  Looking ahead I have cycle dates on the 11th and 23rd of April and then the important 270-calendar day cycle count from the August low sitting on the 5th of May. 

Soybean Oil – I like the setup that could be developing in the oil market but need to sit tight now through the weekend.  Monday will mark the 8th cycle of 90-calendar days from the April 2012 peak and will also be 2nd cycle of 90 cd from the low posted last October. 

Soybean Meal – May meal did poke in a higher contract high yesterday but could not close above the previous high water mark of 472.90.  While we could be looking at a possible double top, with the uncertainty of Monday in front of us other than some short-dated options I plan to sit tight.

Cotton – We have a big volatile week in the cotton market but as it stands right now, we are little changed for the week.  This whole picture continues to look hazy.  Short-term indicators are oversold and trying to turn up with intermediate overbought and trying to point lower.  For now, I remain on the outside looking in. 

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Morning Comment - A waiting game for Monday

Mar 27, 2014

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Wheat

Fundamentals – With concerns that Russia was going to continue to march right into the heart of Ukraine subsiding, traders minds are a little more at ease and when combined with rains in the dry areas to the west and south, buyers were hard to find in the wheat market yesterday.  Add to this, Mexico sold a cargo back to the United States and the extremely long positions held by the funds and it would appear that wheat bulls are going to have a difficult time defending their bias.  We could see a little more position squaring between now and the reports on Monday.  For the wheat trade, grain stocks will likely be the number they key in on.  Keep in perspective that there will be no supply/demand reports Monday. 

Export sales were basically unchanged from a week ago at 400,500 MT or 14.7 million bushels and right in line with expectations.  This brings the year to date total up to 29,916,000 MT or 1.099 billion bushels.  With 10 weeks left in the marketing year, we need to sell an average of 7.6 million bushels per week to reach the 1.175 billion bushels target.  Sales for the 14/15 crop year were 327.5k MT or 12 million bushels. 

Corn

Fundamentals – Corn has really been tugged around by the wheat trade for the last couple weeks and yesterday this was to the downside. Overall we remain in a 3-week congestion pattern and most likely will continue to do so into Monday.

Even without the pressure in wheat, the news in the corn market was not all that positive yesterday.  The easing of concerns in Ukraine, an estimate from the US attaché in Brazil that the corn crop will be larger than previously anticipated and a less than stellar weekly ethanol production report.  For the week ending March 21st, the average daily production came in at 885k barrels.  This is 10 million barrels under the 10-week average and should equate to around 93.5 million bushels of corn.  Additionally, for the first time in the past 6-weeks we saw stocks climb. 

Export sales for corn were surprisingly solid this morning, totaling 1.41 MMT or 55.52 million bushels.  The trade was expecting to see something in the 21 to 28.5 million bushels range.  This brings the year to date tally up to 40,372,000 MT or 1.589 billion bushels. To keep this in perspective, for the entire 12/13 marketing year we exported 731 million bushels.  To reach the current USDA target of 1.625 billion bushels, we will need to average just 1.5 million bushels per week over the next 23 weeks so I would expect to see this estimate boosted at least 25 million on the April supply/demand report.  Sales for the 14/15-crop year were pretty insignificant at 1.1 million bushels.

Soybeans

Fundamentals – The bean bulls are just not ready to give up.  Prices pushed higher once again yesterday basically on the same old story of tight domestic supply concerns.  On one side of the coin, you cannot argue with the reasoning as we have to cut demand and increase supply, but gauging by what is happening around the world bean trade right now, it would appear that the hand writing is on the wall.  China continues to try and aggressively sell beans back into the market and between what we could buy from them and out of South America, I have read estimates that we could import as much as 75 to 80 million bushels this year.  Last year we imported 36 million.  While those could be extreme estimate, anything in between 40 and 70 would certainly ease the supply concerns here.  Keep in perspective that there will be no supply/demand reports issued on Monday. 

While still in the positive column, beans sales were well below trade estimates this week coming in at 11.9 MT or 437,325 bushels and absolutely a marketing year low.  Decreases were noted for unknown destinations, Indonesia, Venezuela, Thailand and Vietnam.  Of course any sales in the positive category push us further above the current projection and with this addition, we stand at 44,444,000 MT or 1.633 billion bushels.  This places us 103 million above the current estimate.

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Morning Report - Uncertainly Stagnates the Trade

Mar 26, 2014

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Here we are at mid-week and there is very little fresh news for the market to digest.  In the grain and soy trade everything is soft with the exception of bean oil, which has been struggling as the others rally, which reinforces the idea that the action is little more that squaring up books in front of the upcoming reports. 

There are plenty of places the USDA could provide us with surprises next week. Looking at corn you need to ask is the feed/residual usage category overstated at 5.3 billion bushels, particularly in light of the problems with the PED Virus in hogs and the low number of cattle on feed?  This number is almost a billion bushels above last year and would be the largest for this category since 2006/07.  There is room to bump exports higher once again but anything more than 25 million bushels would be difficult to justify with the current pace of shipments.  The trade is looking for a cut of 2.4 million acres to 93 million but even there we would be planting the 3rd highest acreage in modern history. 

In beans, we know that the export sales have far outpaced the original projection but there are a number of people in the industry who feel that the crop size from last year was understated and would explain why there has not really been any issues sourcing beans.  On the most recent supply/demand report, the USDA bumped bean imports up to 35 million bushels, which is still 1 million below last year and with continued rumors of more and more beans being diverted from China in the US, could we set a new record for imports this year?  The average trade estimate for acreage stands at 81.2 million acres, which would be up 4.7 million acres.  Granted, more acres do not assure a big crop but it certainly helps provide a buffer.  Note that on the rally in beans over the past week, open interest has actually been dropping which is not bullish.

The wheat market kind of gets lost in all the shuffle in the acreage and usage discussion but we should stand a decent probability of seeing spring acreage higher and several of the factors that have lifted us to this level, i.e., Ukraine and the dry conditions in the West are possibly either becoming old news or non-relevant as moisture could be moving into the very dry areas.  

Finally, funds already hold a very long position in the bean market and as large a position as they have since 2012 in corn.  All combined, this does not appear to be a time for producers to feel overly confident that prices have to continue higher from here.  Granted, the entire risk of the growing season stands in front of us and as they say, you always try and kill a crop at least once, but you have to keep feeding that bull and right now, we could be running low on fodder. 

Wheat

Technical – Since posting the big outside higher reversal on Monday, May wheat has been backtracking.  While that may be a little disappointing for some bulls, unfortunately, this kind of action tells us absolutely nothing about possible future direction.  I suspect that we will continue to chop within this 7.20 to 6.90 range now through the reports next Monday.  Intermediate daily indicators are move sideways in the overbought zone, which presents a warning flag that the next swing should be lower.  As such, the news next week would need to be surprisingly friendly for another move north.  My next cycle date does line up for the 31st.

Corn

Technical – On Monday, May corn pushed back against the upper end of its trading range at 6.90 and has eased backward ever since.  Overall we remain stuck within this 6.90/6.75 trading range and should remain so through the Monday reports.  My intermediate daily indicator continues to correct lower and without a bullish surprise next week should call for a push lower but I suspect that could be limited to a dip down into the retracement zone between 4.60/4.50.  Cycle dates ahead here on the 27th/28th and then on the 7th/8th of April.

Soybeans

Technical – Beans have also been treading water since the rally on Monday and look like a top-heavy market.  As I already commented above, the open interest has dropped over the past week and we are now seeing the 13 and 21-day moving averages cross over to the downside for the first time since very early February when the rally began.  Cycle dates line up ahead on Monday the 31st and without something quite friendly to bring back in buying and it would appear that we are due for a wave lower.  Could be a time to look at puts once again.

Soybean Oil – Bean oil has been struggling all week but has caught a little overnight bounce as beans and meal broke.  This rally has not amounted to much and ideally, we are still poised for additional sideway to lower price action between now and the 31st.  That date will mark the completion of the 8th cycle of 90-calendar days from the April 2012 peak.  If correct, we could have a setup for the B wave reaction low. 

Soybean Meal – May meal is a touch soft overnight but continues to hold around the 460 level that we reached back into late last week.  As with beans, the overall indicators are mixed but we have the 13 and 21-day moving averages right on the cusp of turning lower for the first time since the first of February.  Without a positive surprise come Monday, look for values to head south. 

Cotton – Boy, talk about a head fake.  After posting a sharp outside reversal lower on Monday, May cotton reversed into new highs yesterday and continued the acceleration overnight.  We do sit right on top of a minor cycle date but there is absolutely nothing in this price action to indicate exhaustion. We should continue higher into the weekend. 

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Morning Comments - Countdown to USDA report

Mar 25, 2014

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Wheat

Fundamentals – The wheat market remained solidly higher throughout the day yesterday led by another round of fund buying.  The biggest reason cited for the strength was the ongoing concern about the unsettled situation in Ukraine.  There have been no real disruptions with shipments in that region but this is a "futures" market and part of that role is to build in risk premium when there is uncertainty.

Second on the list for buyers are concerns are the winter crop here.  Weekly ratings were lower with Texas and Oklahoma and are now ranked lower than a year ago.  Good/Excellent in Texas is at 11% and Oklahoma 17%.  There are rains forecast to move through the region beginning this weekend and decent weather in April May could yet turn this situation around. 

Export inspections yesterday were a bit higher than the prior week and above the 10-week average but fell within the range of estimates.  We shipped 19.3 million bushels of wheat bringing the year to dates total up to 766.4 million bushels.  To reach the USDA target we will need to average 20.2 million per week for the next 12 weeks. 

Corn

Fundamentals – The corn market appeared to have been pulled by the wheat and beans yesterday but nevertheless, funds were buying and we were able to push up and challenge the upper end of the current trading range.  While wheat seems to receive most of the attention when we talk about the situation in Ukraine, keep in mind this country is expected to ship between 18 and 19 MMT of corn into the world market this year and unlike wheat, the majority of this years production is yet to be planted.  They have already shipped around 90% of the projected corn total for this year. 

Corn exports last week were solid at 45 million bushels, which was 11.5 million above the 10-week average.  This brings the year to date tally up to 829.4 million bushels and means we will need to average 34.6 million per week to reach the 1.625 billion bushel target. 

I suspect most of the rest of this week will find a focus on the upcoming reports. First we will see the quarterly hog and pigs report Friday afternoon, which should provide a reflection of the impact of the PED virus that swept across the county.  Of course on Monday then, we will see both the March 1st grain stocks and Prospective Planting reports and they should set the tone for the market into late spring/early summer.

Soybeans

Fundamentals – Maybe it was just that nothing overtly negative came out of the crush meeting in China over the weekend but the bulls in the bean market emerged from the shadows again yesterday and still appear to be hanging around this morning.  Export inspections did not provide much to cheer about as we slipped down to 26.9 million bushels, which was over 20 million under the 10 week average.   That said, we do not need to ship many beans as the year to date tally now stands at 1.192 billion bushels, leaving only around 337 million bushels to ship over the next 23 weeks to reach the target.  That equates to only 3.2 million per week. 

Outside of this, there is not much fresh news circulating in the bean market.  South American harvest continues at a nice pace there is consistent discussion about how China is trying to move beans back into market or pushing forward deliveries.  

Here as well, the focus should continue to shift to the upcoming reports. 

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Afternoon Wrap Up - Where did all the seller go?

Mar 24, 2014

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You have to scratch pretty hard to uncover a solid reason for the rally in the grain and soy market today but nevertheless, everything closed higher.  Nothing bad came of out of the crusher meeting in China over the weekend, which probably came as a relief to some, but neither did anything positive.  The situation in Ukraine is anything but settled and the leaders of the West are meeting in Europe but I suspect there is little they can effectively do outside of a few sanctions.  Reports from Ukraine indicate that 52% of spring crops are now planted. 

Export inspections were all within expectations.  26.9 million bushels of beans were shipped during the week ending 3/20 bringing the year to date total up to 1.457 billion bushels.  This means we only need to ship a total of 73 million bushels over the next 23 weeks, or an average of 3.2 million to reach the target, which looks like a foregone conclusion at this point. For corn we moved 45 million bushels, which brings the marketing year total up to 829 million bushels or 51% of the projection.  We need to average 34.6 million per week to reach the current target.  For wheat, we moved 19.3 million bushels, bringing the YTD total up to 933 million.  To reach the targets of 1.175 billion we need to average 20.2 million per week for the next 12 weeks.

The volume was not heavy today, and it would appear that a lack of sellers allowed the strength more that any overwhelming kind of buying interest.  Look for additional choppy erratic action between now and next Monday.

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Morning Comments - Full - Interesting Bounce

Mar 24, 2014

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Wheat

Fundamentals – Grain and soy markets began the trade for this week under a little pressure but between 2:30 and 3:00 in the morning prices turned back higher and while we have pulled away from the overnight highs, remain in the positive column.  I do not specifically see any news in the wheat market that would call for an extended bounce from here and most of it is a re-hash of what we traded on last week; Dryness in the south and west and tensions in Ukraine.  With the quarterly grain stocks and prospective planting report now just a week away, we could see prices just remain choppy and range bound between now and then.

The trade is looking for something in the 15 to 20 million-bushel range for the export inspections.  

Technical – Quite a wide range overnight in May wheat as we traded through both ends of Friday’s range but still remain well contained within last week’s range.  My intermediate indicator is now rolling over so unless we are surprised by another Black Swan event, I suspect we are poised for a downward correction moving forward.  If that can begin before the reports on the 31st is debatable though.  The next cycle date ahead is on the 31st.  If we have turned lower from there, look for a general swing down into at least the 10th of April but ideally into the end of cycle counts that line up on the 21st

Corn

Fundamentals – The corn market was higher quickly after the open last night but traded quite stable until 2:45 and then witnessed a nice little half-hour rally and before returning to where we were trading prior to the bounce.  It is tough to find much reasoning for the mini-rally other than maybe a short-term technical bounce from the pressure late last week.

As with the wheat market we may just continue to tread water between now and the 31st as we await the grain stocks and prospective planting report.  The trade is looking for export inspections in the 35 to 40 million bushels range. 

Technical – At the lows on Friday, May corn was pressing against the bottom end of the current congestion range and flirting with a minor breakout lower.  With the overnight bounce through we have pushed back towards the upper end of the zone around 4.90.  We are now a little over 3 weeks into this sideways range and could remain here through the reports next Monday.  Through it all the intermediate daily indicators continue to correct lower and could use a couple more weeks before it would reach back to the oversold zone.  I continue to believe we should have room to reach down into the 4.60/4.50 zone on this corrective swing.  Cycle dates ahead on the 27th, the 7th and then the 18th

Soybeans

Fundamentals – The bean market opened under pressure overnight but posted the low with in the first 15 minutes of trade.  Over the weekend there was a meeting of Chinese Crushers discussing the difficult stretch they are going through with the glut of product in that country and the backlog of beans coming in.  While it would not appear that anything was resolved, we have the ongoing stories circulating about China trying the cancel/roll ahead purchases.  There was nothing particularly uplifting in South America either as Brazilian harvest is now estimated to be somewhere between 67 and 70% complete compared with 64% as year ago.  

Regardless, prices bounced sharply here as well overnight and it would appear this was the market that stimulated the rally in everything else.  Between 2:30 and 3.45, May futures rallied from 14.05 to 14.32 ¾, and then pulled back below the 14.20 level.  I still do not see anything that would suggest there was a good reason for the rally so suspect it was mostly technical.  Here as well, we could witness as choppy week as we move out to the report next Monday. 

Technical – May beans dipped through the 14.00 level briefly overnight but bounced back quite nicely in those wee morning hours.  While I continue to believe we posted what could be an important reaction high last week, we will need to push down through at least 13.75 ½ to confirm.  Short-term oscillators are pointed lower and if we cannot maintain strength into the close it would increase my confidence level that we have a high in place.  Cycle dates ahead on the 31st and then the 11th

Soybean Oil – May bean oil did not see much of a bounce while the other markets rallied but has traded fairly stable overnight.  Short-term indicators are oversold while intermediate still point lower.  For now, we need to sit tight until we reach the end of cycle counts out on the 31st

Soybean Meal – Good-sized range in May meal overnight as we traded from lower to higher but there is certainly nothing conclusive we can draw from the action just yet.  Failure to hold the gains into the close should tip the scales lower and open the door for a push down to the 425 zone. 

Cotton – May cotton pressed right up against the March 13th contract high of 93.75 overnight and we pushed lower from there.  There is not much that we can read into the action yet and with the daily oscillator losing downward momentum I suspect there will be willing buyers sitting underneath.  Cycle dates ahead on the 26th and then the 7th of April.

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Morning Comments - Full Report - Acting like a tired bull

Mar 21, 2014

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Wheat

Fundamentals – The wheat market appeared to have provided us with the first indication of exhaustion yesterday as after pressing into the highest levels traded since last summer in the spot futures, prices turned back down to post a lower close.  While this was not a slap in the face kind of reversal, any time you fail from a new high, we need to sit up and take notice. 

Part of the reasoning for the reversal yesterday stemmed from stories that Brazil could be shifting over to the Black sea to obtain their wheat needs.  This advance has moved the US into an uncompetitive situation for many.  Granted, part of the advance has been a reaction to the Russian/Ukraine/Crimea situation and to a large extent that appears to no longer be a headline topic.  The west has issued sanctions against Russia, which I am sure has Putin terrified but seeing that for now at least, they are not making any additional "incursions" to protect Russian speaking citizens and there have been few disruptions in grain business activity, markets are feeling a little less anxious. 

Potential rains in the south and west and anticipation of the March 31st report will probably set the tone for much of next week. 

Technical – May wheat reached up and pushed through the October 23rd reaction high by just 1 cent yesterday and then turned lower for the close.  While technically not a "hook" or "key" reversal, it is another sign of exhaustion and we are moving extremely close to rolling the intermediate daily indicators into a sell.  If that happens it will be the first time since they turned higher back at the beginning of February and the first time that we will have turned lower from an overbought position since October.  I have cycle dates head on the 25th and the 31st and there is a possibility that we could chop sideways through that period.   

Corn

Fundamentals – As a whole, the corn market appears to be pushed and pulled by the other markets and continues to chop within same range it has for the past couple weeks now.  It would appear that we are at a point in time where corn is in between much meaningful news.  CIF values have been backing down with the river situation improving and farmers have been willing sellers on this advance, so there is product in the pipeline. Argentine farmers are making headway with harvest but are only estimated to be 15% complete at this point.  That said, they should be presenting increasing competition in the weeks ahead.  While there is some concern about the lateness of the onset of spring it is too early to build much excitement and of course, the USDA reports are still over a week away.  All told, we have not had much that has been able to push values much higher or lower. 

I continue to feel that this market is a bit top heavy at this point in time and should be in line for a correction lower.  That said, there is more than enough risk and uncertainly ahead of us and I do not believe we have seen the last of the bull for this year. 

Technical – With the break yesterday and pressure overnight May corn pressed down against key support but so far this morning we have been able to hold and bounce away from the danger zone.  The lowest point that we have traded over the past two weeks was 4.73 ¼ but it would appear that the line in the sand is really the 4.75 ½ /4.76 ½ level.  A close below that point should confirm a reaction high.  My short-term oscillator is struggling but still close to the oversold zone which could offer room for a little bounce next week but intermediate indicators point lower.  I continue to believe we have room to retrace down into the 4.60 to 4.50 zone into early April.  I have cycle dates lining up for the 24th and the 27th

Soybeans

Fundamentals – While the bean market still held minor gains in the front months yesterday, we had surrendered the big strength and this in face of positive export sales again.  While the bulls may not be ready to completely give up the ship here, with China continuing to try and sell beans back into the market and their domestic markets headed south, it is becoming increasingly difficult to defend the story.  Add to this, increasing supplies from South America and it makes one wonder how we have held this well. 

Granted, there remain a number of questions on the domestic front in regard to the amount of beans we actually have but it will take time to find adequate answers.  Some could come via the Grain Stocks report on the 31st but I suspect the week that we post a negative sales figure, bulls will be running for the exits. 

Technical – While we still lack a confirmation, the action and lineup in the bean market yesterday has all the makings of a peak.  May futures failed just 3 ½ cents shy of the early March high and while we did not close lower, we have seen pretty decent pressure overnight into the morning trade.  The daily oscillator is rolling over and a close back below 14.00 should turn the tide back out.  If correct, we should see prices track lower at least into the 31st and possibly the 11th of April. 

Soybean Oil – May bean oil reached into lower lows yesterday and pushed below the 41-cent level before bouncing.  Prices are back under pressure again this morning and we could be set for a push right down to a 61.8% retracement of 40.16.  Short-term we are oversold and on top of a minor cycle dates which could present an opportunity for a bounce into the 31st

Soybean Meal – May meal pushed to within a dollar of the February 27th reaction high and did hold gains for the close, but are under pressure this morning.  With this selling, we have posted the first lower low in the past seven sessions and have the daily oscillator turning down.  Closes below 459 should confirm the turn and open the door for a swing down through the end of the month. 

Cotton – The cotton market has just zigged and zagged this week and as a whole, we have remained above last Friday’s close but that said, we have failed to push into higher highs.  Short-term indicators are reaching the oversold zone and could set us for another push higher next week.  Cycle dates ahead on the 26th and then the 7th of April. 

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Morning Comments - Beans Sales Positive Again

Mar 20, 2014

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Wheat

Fundamentals – It is officially the first day of spring and as I look out the window of my office all I see is a fresh, although quite thin, blanket of snow.  The real spring is slow in coming for pretty much everyone.

The wheat market was the star performer on the upside again yesterday.  Some believe it was due to concerns about potential greater than normal abandonment of the winter crop while others point to the ongoing tensions in Ukraine and the need for additional risk premium.  Undoubtedly it was a combination of both as funds continue to buy as we push to the highest levels traded since June of last year for spot futrues.  I do not want to downplay either of these issues nor am I prepared to step in front of a raging bull, but do feel it is time to take a little more rational look at the overall situation.  This advance should be providing Canada and Europe plenty of incentive to boost acreage and while that does not insure good crops, it can ease many concerns.  Sure, if an El Nino truly develops later this summer that could pose issues with the next Australian crop but that is stretching the envelope pretty far to build a bull case. 

Export sales are slipping as this past week we sold 401,800 MT or 14.77 million bushels.  This was still within the range of trade estimate of 250k to 500k MT.  This brings the year to dates sales up to 29,516,000 MT or 1.085 billion bushels, meaning we will need to sell an average of 8.2 million per week moving forward to reach the USDA target of 1.175 billion.  There were sales of 7.2 mill. for 14/15.    

Corn

Fundamentals – Corn has turned into a follower instead of a leader at this point with the wheat market calling the shots.  The biggest bright spot for corn right now is ethanol margins that are just through the roof and will keep demand and basis levels strong for anyone in a reasonable proximity to a plant.  For the week ending March 14th, production bounced back to 891,000 barrels per day. This is below the year to date weekly average of 895,000 barrels but was a solid bounce from the prior week and still reflects usage of over 94 million bushels of corn.  Weekly stocks were down for the 4th week in a row and sit 26 million below the year to date average. 

Corn export sales were just above the upper end of estimates coming in at 745,800 MT of 29.37 million bushels. This brings our year to dates total up to 38,964,000 MT of 1.534 billion bushels.  To reach the USDA target of 1.625 we need to average just 3.8 million per week moving ahead. 

Soybeans

Fundamentals – While wheat may have been the leader yesterday, beans were no slouch.  There is talk that a 4th cargo of beans that had been destined for China was sold into the United States but it would appear that until the bulls see a measurable shift in the supply/demand tables they will continue to hold fast.  Even with the overnight strength we have not yet been able to reach back to the highs posted two weeks ago but they are within striking distance.  To borrow a phrase from the movie Jerry Maguire, the bulls in this market appear to be saying "show me the beans."

The trade was expecting export sales to come in anywhere from a negative 100k MT a positive 300k MT and we actually registered 202,200 MT or 7.43 million bushels.  Realistically, anything in the plus column is feed for the bull at this point in time.  This brings our YTD total up to 1.633 billion bushels, which is 103 million bushels above the USDA estimate and puts us almost at the same place we were before the adjustment on the last supply/demand report. It would seem obvious that the export and import estimates will be pushed higher on future reports. Sales for the 14/15 marketing year were also quite solid at 437,500 MT or 16.08 million bushels. 

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Afternoon Update - Wheat leads the charge again

Mar 19, 2014

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It was all about the wheat market again today as additional stories of turmoil in Crimea/Ukraine spooked prices higher once again.  The latest incidence reports that Pro-Russian Troops have overtaken a Ukrainian naval base.  As I have commented, this situation will almost certainly give us knee-jerk reaction days like this, but also keep in perspective that if this is the only thing propping prices up, that is akin to making a bet as to if it will rain or not tomorrow. 

The bean market was no slouch either today as we continued to correct back higher but the export sales in the morning could be a defining moment.  Trade estimates range from a negative 100k MT to a positive 300k.  There were additional stories about Chinese cargoes from South American being sold into the US markets and if sales come through in the negative column, I have to imagine that will really take the wind out of the bull’s sales. 

Estimate for corn range between 400 and 700k MT and for wheat 250 to 500k. 

EIA Ethanol production bounced back well this past week as we produced an average of 891,000 barrels a day, which should work out to around 94 million bushels of corn.  Weekly stocks were actually down 27 million gallons as well. 

Outside of happenings in Ukraine the focus after tomorrow should almost exclusively shift to the March 31st reports.  If prices hold here or track higher between now and then, I suspect the numbers will need to be surprising positive or it could turn out to be a very anti-climatic event. 

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Morning Comment - Full Report - Bean action could be critical

Mar 19, 2014

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Wheat

Fundamentals – Very solid strength in the wheat market yesterday led by the Hard Red winter market.  Granted, April moisture could change the situation quickly but there are concerns about the very dry conditions to the south i.e. Texas and west.  Also pushing values yesterday were offers from Russia for Egyptian tenders that were higher than anticipated. This would seem to reflect the desire of traders there to build in additional risk premium due to the ongoing uncertainty in Ukraine.  If this persists it could force some business back to the US. 

Prices have eased a bit overnight and I suspect we will fail once again but it is obvious that bears are going to have a difficult time remaining comfortable with positions and will be quick cover at the hint of any problems.  As I commented on the weekly letter, stories that were ignored 30-day ago, such as possible winter kill, create quick positive reactions in the current environment. 

Technical – May wheat has once again pressed against the upper side of the recent trade but so far at least was unable to poke through last weeks high at 6.96 ½.  It would really not be unreasonable to see prices push through that mark as last week into expiration the March contract posted a high at 7.00 ¾ and the 38.2% retracement on the spot chart of the entire range lower from the high in November 2012 sits at 7.01 ¾. Intermediate indicators are overbought and moving sideways but have yet to cross.  The next cycle dates sit on the 25th/26th

Corn

Fundamentals – Solid bounce in the corn as well yesterday but I suspect it was being tugged along by the other markets.  That said, with ethanol margins very strong and continued demand from the export sector, there appears to be willing buyers whenever there is weakness. 

The moderating weather should help the flow of corn, no pun intended, as the upper river systems open.  Barge freight has already begun to back down. 

Once we have moved past the March 31st reports and assuming that they hold no major surprises, the focus of the trade should quickly turn to spring weather.  Planting is moving ahead in the southern states and temperatures are finally beginning to edge higher in the north, at least enough to melt much of the snow cover.  Still, most forecasts that I have seen keep us in a cool/wet pattern for the foreseeable future, which should keep markets uneasy for the weeks and possibly months ahead.  Normally, that would translate into higher prices as we try and compensate for the uncertainty. 

Technical – The bulls in the corn market are just not ready to surrender the ground they have taken but that said, they have not been able to make any additional headway either. On a closing basis, May futures have been trapped between 4.91 and 4.78 and a high to low range of 5.02 ½ and 4.73 ¼.  Short-term oscillators are once again oversold which could offer us a few more days of positive response but with intermediate indicators still pointing lower, I continue to believe we are in line for a correction lower as well.  Cycle dates ahead on the 24th and the 27th

Soybeans

Fundamentals – Solid rally in beans yesterday and strength again overnight led by the meal trade.  The biggest reason cited for the rally are the tight domestic stocks and the need to hamper demand and/or bring more beans into this country.  While both may be happening, until there is more verifiable certainly of that, we are bound to see these kinds of reaction every now and then.  I suspect this move will falter again this week but may need a weak or negative export sales number to burst the bulls balloon. 

JCI China has now estimated that due to the unprofitable situation with hogs, overall feed sales in China will be down 40% and in poultry, reflecting the health issues, feed sales will be down 60%.  Combine this with the Ag bank pushing for the release of government corn stocks and it would be challenging to make a case for the bulls moving ahead. 

Technical – With the overnight strength, May beans were able to reach up and complete a 78.6% retracement of the recent break and appear to be acting a bit weak in the knees.  My daily oscillator is still pointed up and could use another day or so to push into the overbought zone and with the idealized cycle date for the week lining up for tomorrow, we could be setting up to post a high in this time frame.  As I have commented previously, failing below the existing high of 14.60 could setup a classic top formation. Remain patient for another day or so.

Soybean Oil – After dipping into lower lows yesterday, May oil was able to reverse higher into the close with follow-trough again this morning.  It would appear that we should be poised for a couple days of rebound at this point and should have room to push back to at least 43.30.  Cycle dates line up for the 20th/21st and higher into then could position then for another swing lower into the end of cycle counts on the 31st.

Soybean Meal – Much like the bean market, May meal came very close this morning to completing a 78.6% retracement of the recent break at 463.90 but appears now to be running out of momentum.  My daily oscillator is already overbought and with cycle dates lining up into tomorrow, it would appear that we could have a high in the making.  Meal led the bean market high on this corrective rally and could now lead us back lower. 

Cotton – Yesterday May cotton posted its highest close yet and did follow through a bit overnight but remains contained under the two spike highs at 93.35 and 93.75.  The overall picture continues to remain cloudy so we need to remain patient until that clears up.  The next cycle dates ahead on the 25th/26th

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Morning Comments - Tuesday Undo?

Mar 18, 2014

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We seem to have an uneventful Tuesday morning and I suspect the rebound in prices is little more than a Tuesday undo bounce.  The only solid news that I have seen from Ukraine this morning was a report that spring wheat planting had reached to 24% with no reported issues with seed availability.  By no means is this to say that will be the last of troubling news and I suspect that with Putin now talking about annexing Crimea traders are feeling a little less at ease, but at least spring work is progressing.  

As we reported last night the February soybean crush actually came in a little better than expected at 141.6 million bushels.  This compares with 156.9 million bushels in January and reflects a pretty typical seasonal decline.

Export inspections yesterday fell within the range of estimates.  For corn we shipped 38.5 million bushels, beans 34.5 million and wheat, 17.1 million.  This means that to reach the current USDA targets we will need to average 35 million each week for corn, 4.2 million for beans and 20.1 million for wheat.   It would appear that the USDA will be forced to push than bean number higher again on futures reports but I suspect they will boost exports and probably trim crush a bit each time as well.  Still no confirmation but stories persist that China is trying to sell at least 2 cargos of South American beans into the United States.

There are more estimates trimming the size of the Brazilian bean crop with Cordonnier reportedly taking his number down to 86 MMT.  This compares with the current USDA estimate of 88.5 MMT.  Conversely, the second season planting of corn appears to be moving along week and is reported to stand between 85 and 88% in the various regions. 

While traders will be looking out of the corner of their eye on developments in Ukraine, most of the focus will be on the March 31st Prospective Planting and Grains Stocks reports.  The Hueber Report Released the results of our client planted acreage survey yesterday and came up with the following;

Corn Acreage           92.53 million (-2.84 million)        

Bean Acreage          79.37 million (+3 million)

Wheat Acreage       56.16 million (unchanged)

 

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Afternoon Update with Acreage Est

Mar 17, 2014

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With tensions eased just a bit concerning the situation in Ukraine, the corn and wheat markets had little new to prop up the bull and hence slipped backwards while a slight pickup in domestic meal demand and short-term oversold conditions were enough to give the bean market a little boost.  

The February crush actually came in a little better than expected at 141.6 million bushels.  This compares with 156.9 million bushels in January and reflects a pretty typical seasonal decline.  

Export inspections fell within the range of estimates.  For corn we shipped 38.5 million bushels, beans 34.5 million and wheat, 17.1 million.  This means that to reach the current USDA targets we will need to average 35 million each week for corn, 4.2 million for beans and 20.1 million for wheat. 

Part of the pressure in the corn market today stemmed from a report that the Ag Development Bank of China is recommending that corn be sold from government reserves. 

We did release our acreage estimate today for the upcoming reports, which is based on our customer survey. They are as follows;

 

Corn Acreage            92.53 million (-2.84 million)          

Bean Acreage             79.37 million (+3 million)

Wheat Acreage          56.16 million (unchanged) 

I would expect to see choppy defensive action between now and the end of the month baring any more Black Swan events.  

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Morning Comments - Lacking Fresh Stimulus

Mar 17, 2014

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Wheat

Fundamentals – As expected, Crimea voted to move into alignment with Russia and while that is not being recognized by most of the rest of the world, the fears were that it would spark additional unrest or even further western expansion by Russia, which has not been the case, at least as of yet.   Without that stimulus to build in more risk premium, prices have traded defensively overnight. 

This recent advance has pushed US wheat into a very un-competitive position in the world market so without any additional news to panic buyers, it would seem unlikely that we can maintain this rally.  Funds have now moved the long side of the market over the past couple weeks and while they may defend that position on setbacks, there seems little to attract additional buying for now. 

Technical – Close but no prize just yet.  May wheat has seen two-sided action overnight and appears to sit right on the precipice but we have not been pushed over the edge just yet.  Last week’s lows are all the way down at 6.37 but I think that a violation and close below 6.70 at this point would cross indicators lower and confirm a reaction high.  If successful, we should have room to head down to at least 6.42 but more likely 6.25 and ultimately 6.08.  Cycle dates do line up into tomorrow so a Tuesday undo bounce could present a selling opportunity.

Corn

Fundamentals – Without additional feed this morning the corn bull is looking a little ragged and has started out the week moving backwards. The overall news is not encouraging at this point.  Planting is beginning in the southern states, harvest continues to expand in Argentina and we are not price competitive with them. The PED virus continues to ravage hogs herds domestically and in China, unprofitability in hogs is creating liquidation and Avian flu has cut into the poultry production.    Fund length in corn is now the largest it has been in well over a year. 

The ethanol sector continues to operate with tremendous margins and should be a support force but with little else showing up on the radar right now, it is not a stretch to think prices could struggle in a retracement pattern between now and the Prospective Planting and Grain Stocks report at the end of the month.  

Technical – Defensive start for the week in corn as well but so far May futures remain within last weeks range.  Intermediate indicators have already rolled over and if we can now push through last weeks low at 4.73 ¼ I suspect it will trigger a round of sell stops.  This contract should have room to push back down to at least 4.58 ½ and potentially 4.48 on a correction.  I have minor cycle dates ahead on the 24th and then during the first week of April.

Soybeans

Fundamentals – Funds actually reduced long positions in the bean market last week, which fits well with the first lower week in the past six.  There are a number of stories/rumors circulating that China is trying to resell as least a couple cargoes that they had purchased into the United States.  While nothing has been confirmed, I suspect this will not be the last time we hear of such occurrences this year.  The NOPA crush number will be released later this morning. 

The Brazilian harvest is estimated to have reached 59% completion and should reach 70% by this coming weekend.

As with the other markets, there appears to be little positive news to look at for the time being and we could see prices trade in a generally defensive pattern between now and the reports at the end of the month.

Technical – Beans have witnessed two-sided action overnight and while the early trade have been predominately defensive, the bulls have not completely given in just yet.  While I believe we have posted a reaction high, the short-term oscillator is quite oversold and we could be in store for 3 to 5 days of corrective bounce. Cycle dates line up this week between the 18th and 20th and if we can push a bit higher during that period we could setup a classic topping formation and potential selling opportunity.    

Soybean Oil – With the overnight pressure, May bean oil reached down to complete a 38.2% retracement at 42.03 and appears to have found a little support.  Short-term oscillators are extremely oversold and a corrective bounce should be in order.  On the spot chart, we left a gap up between 43.32 and 43.51 and that could be a little target to shoot for.  Cycle dates ahead on the 20th and then end of cycle counts on the 31st

Soybean Meal – Two-sided action in the meal overnight and with the daily oscillator turned higher, it would appear that we have room for a little corrective bounce in the days ahead.  Cycle dates this week on the 20th.

Cotton – May cotton has traded defensively overnight and into this morning but is providing us with little to work with at this point.  To confirm a peak we will need to reach down and close below 90.44 so for now just need to remain patient.  


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Daily Comments - Full - Almost like the old days of volatility

Mar 14, 2014

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With the weekend now staring right at us, we are winding down what has been one of the more tumultuous weeks in the grain and soy trade in sometime.  On the negative side we have seen bean purchases cancelations by China in the Southern hemisphere, with collapsing basis levels to go along with it.  In China, with the glut of beans arriving, crush margins have come apart, also partially due to slack demand in response to problems with Avian flu, which has turned them into an exporter of protein into the Pacific rim.  Domestically, recognition of the scope of death loss due to the PED virus in hogs, which has trimmed demand for both corn and meal has analysts backing down feed usage estimates.  According to the National Animal Health Laboratory as of last week, there have been 4,458 reported cases of PED, and of course you have to suspect there are many that have been unreported and we are not beyond all the problems yet. 

On a more positive note, ethanol margins are tremendous which should keep good support below the corn market, the heaviest cancellations for beans were in South America and we still posted a positive export sales figure for beans, albeit the lowest of the marketing year.  Additionally a bean vessel ran aground at the Rosario port in Argentina, creating a bottleneck.  80% of Argentine shipments move through that port and it could be out of commission for a week but considering the number of cancellation that are occurring, this may be more of a psychological factor than a real one.    

Of course the 800-pound gorilla in the room, or maybe in this case I should say the 800 pound bear, is the situation with Ukraine/Crimea/Russia.  There will be a referendum vote this weekend in Crimea to determine if they wish to align with Russia and considering the 59% of their population is ethnic Russian, odds favor that will be a positive vote.  There have been no reported issues outside of Crimea as far as grain trade nor the plans for spring planting but with the overall situation remains in flux, and when markets are uncertain, the will build in risk premium.  The strength in the wheat market this week was tied directly to this and appeared to be the final straw that forced funds out of the short side. 

As we move into next week and beyond, we should begin to hear increasing discussion about the upcoming Grain Stocks and Prospective Planting reports.  The Hueber Report will release our estimates next week as well.   This has already turned out to be an interesting start to 2014 with at least one Black Swan that has startled the trade.  It is hard to imagine there will not be at least one more as the year progresses. 

Wheat

Technical – After pressing into higher highs again yesterday and almost reaching the 7.00 mark, May wheat reversed to post a lower close.  Prices have rebounded overnight and while we have not quite yet turned the intermediate daily oscillator lower, I suspect it should happen within the next few days.  I have cycle dates lining up today through Tuesday.  While the ever present risk of additional problems in Ukraine should provide underlying support and potential for a knee-jerk rally every now and then, after a 26% rally over the past 29 trading days, we should be in line for a corrective pullback.  If correct, we should have room to reach back down to at least 6.40 to an extreme of 6.10 as we move out into April.

Corn

Technical –The strength in wheat has helped to buoy the corn market but we are still lower for the week and appear to be sliding into a corrective mode.  May futures have actually posted an inside trading range and next week, a push down through 4.73 should confirm that we have a reaction high in place.  As it stands right now we have downside retracement targets at 4.69, 4.58 and finally 4.48.  Monday the 17th will mark the 270-calendar day cycle count from the high posted on the 19th of June last year.  Often times that specific count marks the completion of a swing and seeing that we have moved generally higher into the count, it increases the odds that we are staring at a reaction high. 

Soybeans

Technical – May beans bounced enough yesterday to fill the gap that was left on Wednesday but could not sustain that strength for the close.  We are a touch softer overnight but the pressure is pretty insignificant at this point.  This is the first lower weekly low that beans have posted since we turned higher in February and should have confirmed as reaction high but the pressure this week has slid the daily oscillator into an oversold position.  This potentially sets us up for a corrective rebound this coming week.  I have cycle dates that line up between the 18th and 20th and a rebound into then could provide a setup for a classic soybean top formation. 

Soybean Oil – It would appear that May bean oil will be posting the first lower weekly close in the past six weeks but we did not posted a lower low.  Regardless, my intermediate daily indicator has turned south and it would appear that we have a reaction high in place.  If correct, there should be room to retrace down to at least 41 cents and possible 40.15.  Daily oscillators are oversold so we could be poised for a 3 to 5 day bounce.

Soybean Meal – May meal was able to grab hold at the retracement level of 434.60 and post a rally yesterday but has seen no follow-through overnight.  The daily oscillator is turning higher which could present us with 3 to 5 days of corrective bounce.  I have cycle dates ahead on the 20th and if we can swing a bit higher into then, could be presented with a sale.

Cotton – May cotton was able to squeak out a higher contract high yesterday but failed to hold the strength and closed down for the day. Overnight selling has not been significant but it would appear that we have should have a reaction high in place.  Cycle dates line up through the weekend.  A close back below 90.44 should provide confirmation.  

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Afternoon Wrap Up for an uneventful day

Mar 13, 2014

Grain and soy markets reversed positions today with wheat and corn closing lower and the bean market rebounding for the close.  Overall the news was really pretty sparse and other that the export sales that were released a 7:30 central, there was little left to talk about.  In case you missed the numbers, for the week ending March 6th we sold 17.5 million bushels of wheat, 26.9 million bushels of corn and 4.2 million bushels of beans. That was a marketing year low for beans but no surprises in any of these.

Rumors of additional cancelations of South American beans by China continue to circulate and it would look like the concerns of never ending demand from that country are behind us.  The question that lay ahead will probably concern having bean in the right place moving forward, which could mean additional imports into the US.  The USDA currently has imports pegged at 35 million bushels, which is almost identical to last year.  Could there be a new record in the cards? 

Weekend trade tomorrow with March futures expiring at noon but there is really no distinguishing spreads to the May in any of these contracts.  It is interesting to note that May beans did rally enough during the session to close the gap left yesterday, removing it as a possible measuring tool or breakaway signal. 

There remains enough uncertainly around with the situation in Ukraine to keep market from collapsing, especially in front of a weekend but without more positive news next week, it would appear that we have some pretty weary bulls at this time.

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Morning Update - Sales Uneventful

Mar 13, 2014

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Wheat

Fundamentals – It was all about the wheat yesterday.  After early pressure across all markets, wheat turned around and led a grain advance, once again stimulated by the concerns about the situation in Ukraine.  Recognize, that there has not really been any significant disruption in grain trade over there and news from the Ag community says there is good availability of seed and other inputs ready for the spring crops but the uncertainty of it all continues to force the bear, which in this case has been the large managed spec out of the market.  Granted, if I were a country looking to secure grain right now, would I feel comfortable putting all my eggs into a Ukrainian basket?  Probably not and hence the risk premium, but at this point, the rally is probably being driven more by technical and position squaring than any real fundamental.

Export sales came within expectations at 476,900 MT or 89.2 million bushels.  This brings the year to date tally up to 29,114,000 MT or 1.070 billion bushels.  To reach the USDA target of 1.175 billion we will need to average sales of just 8.8 million bushels per week.    

Corn

Fundamentals – The corn market produced a very solid reversal from the early pressure yesterday and closed strong in the range but had it not been for the rout of the bears in the wheat market, I suspect the gains would have been meager at best.  Outside of the Ukraine concerns, news was a little sparse and really not all that encouraging.  Domestic basis levels overall continue to soften and Conab surprised the trade with a 75.2 MMT projection for their corn crop. Their previous estimate was 75.5 MMT and the USDA has them at 70 MMT.  Evidently they are counting on a solid 2nd crop down there. 

EIA Ethanol production came in at 869k barrels a day, which is the lowest weekly tally since early January and most likely impacted again by adverse weather.  Marketing year to date, we have averaged 896k per day.  The recent number would reflect corn usage of just under 92 million bushels.  Weekly stocks were also lower, decreasing 30 million gallons.

Corn sales were towards the low end of estimates and the lowest number seen since the first week of January for the 13/14-crop year.  The figure was 683,400 MT or 26.9 million bushels.  Year to date we now stand at 38,218,000 MT or 1.505 billion bushels.  As a point of reference, a year ago at this time we had only sold 582 million bushels for the marketing year.  To now reach the USDA target of 1.625, we need to average sales of 4.8 million bushels per week.  For the 14/15 marketing year we sold 4.1 million bushels this past week.  

Soybeans

Fundamentals – While we did bounce well off the lows and have been able to push a touch higher overnight, the bulls in the beans market were all taken to the wood shed yesterday for a serious lashing.  Most feel that China has canceled at least 20 cargoes of beans out of Brazil and we now have product looking for a home.  Basis levels continue to crumble both here and in South America and for all intents and purposes, it would appear that we have finally tipped the scales back in the other direction. 

Conab did slice their production estimates down to 85.44 MMT from the previous guestimate of 90.  This compares with the last USDA figure of 88.5 MMT.  While this was a bigger cut than the trade was anticipating, keep in perspective that it will still be a new record for Brazilian production. 

US crush numbers for February will be released on Monday. 

While not yet negative, we did post a marketing year low for bean sales, coming in at 113,500 MT or 4.2 million bushels.  Year to date this bring the tally to 1.627 billion which is still 93 million above the new target of 1.53 billion.  Sales for the 14/15 marketing year were decent at 776,900 MT or 28.5 million bushels.


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Afternoon Wrap Up - All Mixed Up

Mar 12, 2014

We ended up with quite a mixed bag for price action the grain and soy markets today.  After pressure across all markets early, wheat turned sharply higher and into new highs for the drive, pulling the corn market along for the ride while beans and products remained under pressure.  I wish I could give you a solid reason for the strength wheat but there was really little in the way of fresh news and it would appear that the funds just continue to head for the exits in face of all the uncertainty around the world right now. 

 

Corn and beans both came well away from their respective lows today but I have to think that both markets will struggle between now and the reports at the end of the month.  Beans are confronting the reality of China pulling out of the market for a while and in fact, I read today that they are exporting meal to other Pacific Rim countries.  The trade is now expecting to see more cancellations instead of purchases.  We could finally see a negative export sales figure tomorrow morning.     

 

Domestically, it is also beginning to sink in the PED virus that has spread across the country is going to cut into usage for feed grains and proteins and the current USDA projections will likely need to be trimmed back. 

 

Estimates for grain export sales in the morning are looking for corn to be  in the 500 to 700k MT range and wheat between 200 and 300k.  

Full Morning Report - Both China and Ukraine tug on markets

Mar 12, 2014

Wheat

Fundamentals – The tensions in the Crimean Peninsula were enough to lift the wheat market higher yesterday but the washout in beans overnight have taken precedence this morning.  As you are likely aware, Crimea is set to vote in a referendum this week to decide if they want to align with Russia and reportedly Ukraine has called up their National Guard.  Outside of Crimea there are no reports of problems with grain trade or movement but understandably, everyone is on edge over future developments.  For a point of reference, Crimea accounts for around 2% of the total wheat production in Ukraine. 

Technical – The rally yesterday was able to lift May wheat into slightly higher highs for this drive but we remain well within the target zone between 6.58 and 6.70.  Prices are basically mixed in the overnight trade with an inside range so far but with intermediate indicators very overbought, I suspect we are going to need to keep hearing troubling news out of Ukraine if we are to maintain the strength.  I continue to feel it is just a matter of days before we see this market roll over for a correction but that may not happen until we move out to the next cycle date ahead on the 18th

Corn

Fundamentals – Corn also caught a Ukraine bounce yesterday but at this point it appears to have been little more than a Tuesday undo rally.  Corn production has risen steadily in Ukraine over the past several years with the crop last year estimated to have been 30.9 MMT, up from just 6.9 MMT a decade ago.  They are expect to export around 18.5 MMT during the current marketing year of which 15 million has already been shipped and I understand that farmers are clinging on to the balance as kind of a hedge against the uncertainty.  Actually Ukraine is a large producer and exporter of barley so brewers in Europe could be uneasy.  Probably the biggest concern is that this country, just like the US, should be headed for the fields for spring planting over the next 30 to 45 days and additional problems with Russia could create issues with fuel and fertilizer.  I suspect this will be a factor that is not going away anytime soon and should be an underlying supportive factor. 

Not much else to report for the corn market this morning.  There is nothing exciting in the export lineup and sales will be reported in the morning.  CONAB released updated estimates for Brazilian crops this morning and now project the corn crop to total 75.18 MMT vs. the previous estimate of 75.47. The Rosaria Exchange released estimates for the Argentina corn crop yesterday placing it at 22 MMT.  This compares with the recent USDA number of 24 MMT. 

Technical – May corn posted a nice turnaround from the early pressure yesterday but with no follow-through overnight.  While I continue to believe we have begun our downward correction, I would still enjoy seeing a little rebound into the 270-calendar day cycle count that lines up for Monday the 17th.  If that unfolds, we could be presented with a selling opportunity at that time. 

Soybeans

Fundamentals – The unrest in the FSU may have given the bean market a Tuesday undo bounce yesterday but the bulls are paying for that overnight and into this morning.  It is not that Ukraine does not play into the world oil seed market as they are a major producer of sunflowers and sunflower oil but with China dropping out of the world beans market at this point, that trumps all else.  Prices gapped lower overnight and it appeared that once we have violated last weeks lows, a number of sell stops were triggered.  This is the first weekly lower low since prices turned higher at the beginning of February. 

The question now that begs to be asked is will China step back in as a buyer, particularly considering that it is estimated that they sold back or canceled quite a few cargos in the past week.  Considering they are still confronting poor meal demand and an active line up of ships, they may not be so quick to step back in.

CONAB cut the Brazilian bean crop estimate this morning from 90 MMT to 85.44. This compares with the most recent USDA number of 88.5, who was also at the 90 MMT mark before the report on Monday.  The Rosaria Exchange now expects the Argentine bean crop to total 54.7 MMT, down 300k from the previous estimate.  The USDA has Argentina at 54 MMT. 

Technical – May beans gapped lower overnight and once last weeks lows were violated, it appear to touch off a big round of sell stops.  This is the first lower weekly low since prices turned higher in February. We have quickly pushed down to compete a 38.2% retracement of both the Feb/March rally as well as the Nov/March rally.  In case you are wondering what measuring targets the gap could leave, they are between 13.61 and 13.54 and we have already posted a low at 13.65 ½ this morning. We are quickly pushing into a short-term oversold position, and I suspect should find very solid support down between 13.61 and 13.50, which could setup a bounce within another day or so.  That said, I believe that ultimately we should have room to reach down to at least the 13.30/13.15 level before the correction is complete.  The next cycle date ahead sits on the 20th

Soybean Oil – May bean oil was not able to maintain strength yesterday and has been under pretty solid pressure overnight and into this morning.  Unlike beans, we have not posted a lower weekly low but I do have intermediate daily indicators finally beginning to roll over.  Retracements lower for this contract sit at 42.03, 41.10 and 40.16. I suspect that we will eventually have room to reach down to the lower retracement but that could unfold in two-swings.  Cycle dates ahead on the 20th and then the 31st with that latter date marking the completion of the 8th cycle of 90-calendar days from the April 2012 high and the 2nd cycle of 90 from the reaction low last October. 

Soybean Meal – After a lackluster performance yesterday, May meal has been under solid pressure overnight and has already pushed down to complete a 50% retracement of the last advance at 434.60 and did not stop there.  It would appear that this contract will be headed for at least the 425.60/423 zone and eventually room to head for the 412 level.  Short-term oscillators are oversold but I do not have a cycle date lining up until the 20th

Cotton – Short-term indicators have rolled over and May cotton is under pressure this morning but the bulls have not completely abandoned ship just yet.  Prior to last Thursday, this market had a contract high of 90.44 and found very stiff resistance against 89.67 and those level should provide support at this time.  At a minimum we need to push down and close below that range to force out bull.  I do have a cycle date lining up for this Friday. 

Morning Comments

Mar 11, 2014

Wheat

Fundamentals – After having rallied almost $1.08 since the 29th of January the wheat market was going to need something positive from the USDA on the supply/demand report to sustain or even maintain the strength but that was not to be the case.  Domestic wheat ending stocks were left unchanged after an offsetting shift of 15 million bushels in exports from soft wheat to hard wheat and world stocks were raised just a touch.  On the world production numbers Australia was bumped up 500k MT and India 1 MMT and a slight reduction for China. 

Export inspections for the week ending 3/6/14 where towards the lower end of estimates at 15.8 million bushels.  This brings year to date up to 895.17 million bushels.  With 14 weeks left in the marketing year we will need to average 20 million per week to reach the USDA target.

We still have a tense situation in Ukraine but so far, no disruptions in movement have been reported.  Baring another flare up there, I would expect prices to work through a corrective retracement between now and the grain stocks and prospective planting reports coming up on the 31st

Corn

Fundamentals – The USDA did bump corn export projections up 25 million on the reports yesterday but that was well anticipated and basically anti-climatic for the corn market.  As such we witnessed a solid and realistically overdue washout lower.  There were some that were disappointed that we did not see a larger increase in the export number but realistically, we are probably going to need to pickup the pace to reach that target.  While shipments by rail into Mexico will be factored in later, after this last inspection of 36.8 million bushels, our marketing year to date total stands at 745.9 million bushels.  This means we will need to average 35.2 million each week moving forward to reach the 1.62 billion target and to date we have averaged 27.6 million per week.  The boost in exports translated to a comparable cut in ending stocks now projected to be 1.456 billion. World ending stocks were bumped up 1.17 MMT with increases posted for the EU and China and both Brazilian and Argentine crops were left unchanged. 

Prices have stabilized overnight but without another shocking event unfolding somewhere around the world I would expect to see prices trade in a defensive corrective mode between now and the next reports on the 31st.

Soybeans

Fundamentals – Was it the slightly disappointing USDA report or stories about Chinese bean cancellation in South America that sent the bean market into a tailspin yesterday?  While I am sure both contributed, I suspect the latter weighed heavier on the market.  There was talk that China may have canceled as many as 20 cargoes from Brazil, reinforcing the ideas that they have gone overboard on purchases. 

On the supply/demand report the USDA elected to increase imports 5 million, cut crush by 10 and bump exports by 20 for a net decrease of 5 in the ending stocks to 145 million.  Exports are now forecast to be 1.53 billion bushels, setting another new record.  Inspections last week came in at 39.7 million bushels, bringing the marketing year to date total up to 1.164 billion bushels so even with the revised figure, we only need to export 366 million bushels to reach the target.  That works out to 5.4 million per week.  Expect to see additional revisions down the road.  World bean ending stocks were lowered 2.37 MMT primarily through a reduction in crop size of 1.5 MMT for Brazil and 1.2 MMT for Paraguay. 

Understandably the bean market suffered the largest washout yesterday and appeared to drag corn and wheat along for the ride.  I suspect that will not be the end of the correction and we should see prices continue to swing lower between now and the reports at the end of this month. 

Afternoon Market Wrapup

Mar 10, 2014

Afternoon Update

Government reports are often anti-climatic and today turned out to be no exception.  As expected both corn and bean ending stocks estimates were reduced with corn down 25 million bushels to 1.456 billion and beans reduced 5 million to 145 million while wheat was left unchanged.  Note that the reduction in corn came via exports while for beans, exports were boosted 20 million but imports were raised 5 and crush cut 10 to arrive at the net 5 million lower.  As I have commented previously, I find it interesting that the trade seems intent to hang on every report that is issued by the USDA while traditionally the February and March supply/demand reports generally do not offer much new, at least for the domestic scene. 

 

That said, this report did not change much on the World scene either.  World wheat ending stocks were bumped up a mere 80k MT, corn ending stocks were actually raised 1.17 MMT and world Soybean stocks were lowered 2.37 MMT.  For the South American estimates, the Argentine crops were left unchanged at 24 MMT for corn and 54 MMT for beans and Brazilian corn production was left unchanged at 70 MMT and beans lower 1.5 MMT to 88.50. 

 

For the week ending March 6th, we exported 36.8 million bushels of corn, bringing the year to date total up to 745.9 million bushels.  We moved 15.8 million bushels of wheat with the total now standing at 895.17 million and for beans, another 39.7 million.  This brings the year to date tally for beans up to 1.395 billion bushels so even with the revised projection of 1.53 billion, we only need to export 5.4 million per week moving forward. 

 

With nothing earth shattering in the reports and the situation in Ukraine tense but not really interrupting anything in the grain trade the path of least resistance was to the downside and that is where we headed.  Of course the Chinese running away from the market and doing everything possible to push back/cancel purchases did not help either.  Without another black swan taking off, I suspect this sets us up for defensive corrective action between now and the quarterly grain stocks and prospective planting numbers to be released on the 31st.  

Morning Comments 3/10/14 Full Report

Mar 10, 2014

Wheat

Fundamentals – While nothing has really been settled with the Ukrainian situation, and a Crimean referendum as to aligning with Russia is scheduled for later this week, the market appears to have grown tired of the news and we are beginning the week under pressure.  Tensions there should keep us from collapsing but after what has been a little more than a 30-day rally for over a$1 a bushel in wheat, we are due for a breather.  Funds remain short but reduced that position in futures by around 20k contracts last week and as a percentage of the total open interest have reduced their short position by around 15%. 

Technical – The wheat market has been under pressure pretty much all night and into the morning hours but realistically there has been no technical damage at this point.  That said, on Friday May futures did reach up to complete a 50% retracement of the entire down swing since May of last year and reached into gap objectives between 6.58 and 6.69.  Add to this we have indicators sitting in a very overbought position and we just moved through cycle dates last weekend and it would appear we have all the ingredients in place for a reaction high.  If correct, we should room to reach back down against the 6.00 level between now and the end of the month.  

Corn

Fundamentals – With cash markets backing away consistently last week it appeared that the only thing sustaining the corn market was the unrest between Russia and Ukraine.   It would appear that we have at least partially confirmed that this morning as with no additional issues over the there, this very overbought market has pulled back.  By no means is there a mad rush for the exits but without new feed every day it is pretty difficult to make a bull grow.

Over the past two months, large managed funds have moved from a near record short position to now long an estimated 170 to 190k contracts.  Granted, it was the solid demand both from the ethanol and export sectors that stimulated the advance but the funds provided the power.  The question now is why, after this advance and adjusting to better than expected demand and building in a little additional risk premium for the unrest overseas, why would they continue to add?  For this morning at least the answer would appear to be they lack the incentive.  This is not to say we cannot be provided additional incentive down the road but after just a bit more than a 20% rally since the January report lows, it would appear we have stretched the band far enough. 

I would not expect the supply/demand reports later this morning to offer anything outlandish which would mean we need focus the reports that should actually have something to say, which are the quarterly grain stocks and planting intentions to be released on the 31st.

Technical – Last Friday May corn was able to reach up and complete the 50% retracement of the June/January high to low range at 5.01 ½ and reversed to post a lower close.  Not exactly a key reversal but probably indicative of just how tired this bull is becoming.  Overnight we did push down enough to test the low from last Thursday at 4.78 ½ and I suspect if we can now violate that level, it will have confirmed our reaction high and open the door for a run down to at least 4.58 and potentially 4.48.   The next cycle date ahead lines up for the 17th and will mark the always important 270-calendar day count from the peak back on the 19th of June last year. 

Soybeans

Fundamentals – It would appear that China is cancelling beans purchases as the numbers stack up at their ports but at this point, it looks like they are opting to cancel South American purchases.  For the month of February they imported 4.8 MMT of beans versus a year ago at 2.9 MMT.  Regardless, the move provides enough reason to open the prices lower this week.

The only number that would seem to matter on the reports today will be what the USDA decides to do with exports.  As I covered last week, we have already sold 113 million more bushels than estimated and the question is will the government bump exports higher or wait and see how many cancellations begin to roll in?  The trade believes they will only back the actual carryout number down around 7 million bushels. 

Managed money continued to add to long positions last week and are pushing against record longs as a percentage of total open interest.    

Technical – The bean market has rallied directly into the cycle dates that lined up over this past weekend, sit with overbought indicators and have started out the week under pressure.  That said, the inside range price action so far really gives us little to latch onto to.  I continue to believe we should be looking at a reaction high right here and will sit tight for a confirmation.  I do not really want to step in front of this bull just yet but this may be a nice opportunity to utilize puts. 

Soybean Oil – We have an inside range in May bean oil at this point in the new week and while I suspect we posted a reaction high last Friday, we still lack a confirmation.  Intermediate indicators are overbought and beginning to move sideways but have yet to roll into a sell.

Soybean Meal – May meal has traded defensively overnight and into this morning but so far, that action tells us little.  The daily oscillator is pointing higher so we could witness a couple more days of bounce but I continue to expect tough resistance between 458 and 462.  If we cannot poke through that level by mid-week we could be presented with a sale. 

Cotton – May cotton has been able to bounce a little from big reversal lower on Friday but the strength is none to impressive so far.  Cycle dates line up at the end of the week so we need to remain patient and see if we are presented with a trade setup, 

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