Fundamentals – Kansas City led the wheat market higher yesterday and concerns about the weather outlook and the risk of a higher than normal abandonment of acreage provided the fuel. Reports from the Wheat Tour were supportive but we will have to wait until Thursday afternoon for the full report. KC has now pressed up against the March highs while Chicago is back against the highs for this month. We have seen a wave of profit taking overnight, I suspect inspired by month end evening up.
There are no notable changes in the weather outlook at this point and while the US model does call for decent rains down through Texas and Oklahoma out in the 8 to 11 day forecast, I suspect the bulls will want to see something a bit more concrete than a forecast before they are ready to surrender.
Overall news is relatively quiet this morning. Export sales tomorrow and then we look out to the May 9th supply/demand estimates. We should not be looking at any significant changes in the wheat numbers but of course this being the first "official" corn and bean production figures, direction in those market would be an influence.
Technical – While that marked the highest close for this most recent rebound in July wheat we still failed to violate the April 16th reaction high of 7.18 ¼ and of course the March high at 7.25 ¼. With the short-term oscillator very overbought and end of cycle counts lining up for this Friday, it would appear we should be very close to at least a corrective high but need to sit tight at least into the end of the week and look for a more telling price pattern.
Fundamentals – With the strength in the corn market yesterday we have nearby futures back up challenging the April 9th reaction highs and we did post the highest close to date for this advance. The wet current weather is providing support but there is more and more discussion about the solid usage and the possibility of seeing the ending stock projection below 1.3 billion bushel on the May 9th supply demand report. I would fully expect the USDA to boost corn export another 50 million bushels. Also supporting prices yesterday were stories about possible issues in Ukraine with credit to get the crops there planted.
It would appear that much of the current moisture will have moved out of the Midwest after tomorrow and by the weekend planting should resume full steam ahead. By the planting progress report on the 12th we could still have between 40 and 50% of the crop in the ground. The most current 6 to 10 day forecasts remain cool and moist which should continue to support values until we see more verification that crops are really getting in the ground.
EIA weekly ethanol production numbers will be released this morning but unless we are significantly above the 260 million gallon production level there should be no reason to alter the current 5 billion bushels corn usage estimate.
Technical – Very solid close in July corn yesterday, as we posted the highest closing price for this contract since the 26th of August last year. That said, we have yet to push through the April 9th reaction high at 5.24 ¼ but with intermediate indicators positive that remains a possibility. The next cycle dates ahead falls on the 8th and seeing that is just one day ahead of the supply/demand reports we could see the bulls try and hold their ground between now and then.
Fundamentals – Looking around at the news it is difficult to find anything more than speculative buying to explain the rally in the bean market. It is estimated that funds purchased another 7,000 contract yesterday. I guess you could make the case that the delayed planting could push bean planting back a bit as well but that would seem to be stretching for a reason.
More reports of South American beans and meal loading for our shores but that is certainly not fresh news. The export sales number in the morning could be interesting as we barely held in the positive column last week.
Technical – We did not press into higher highs yesterday in July beans but posted the highest close to date for this advance and for this contract. We just have a short waiting game at this point to see if we are setting up for a cycle high. The 270-calendar day cycle count sits out on Monday with a possible time/price square at 15.40. If we continue up into the weekend I plan to at least be looking at a possible purchase of puts.
Soybean Oil – July bean oil did bounce back for a slightly higher close yesterday but has really been quite directionless this week in face of the strength in the rest of its family. Short-term indicators are oversold which could provide us with a few days for recovery bounce but a violation of 42.47 should confirm a turn back lower.
Soybean Meal – New highs and a new high close was posted in July meal again yesterday and it would appear that we are on track to post a cycle high between now and next Monday. As I commented yesterday there should be potential to make a run for the 507/508 level between now and then.
Cotton – July cotton posted solid gains yesterday and if we can close above the 93.50 level again today we should confirm another breakout higher. If correct, I will be looking for prices to advance into the 21st of May with potential to take out the existing contract high at 96.76.