The grain markets will be closed tomorrow in observance of Good Friday so with this being that last daily comment of the week, we wish you a Blessed Easter.
Fundamentals – The volatile situation in Ukraine provided the fuel to take the wheat market higher yesterday morning and the increased chances of rains in wheat country in the days ahead diverted their attention and enthusiasm late in the day and prices turned back lower. Prices are higher this morning as we balance out those two forces and I suspect that traders will be most interested in evening up positions for this long weekend.
This week I had the opportunity to hear Robert Zoellick speak at a luncheon. If that sounds like a vaguely familiar name, he served in both Bush Administrations as well as Reagan’s in a number of different roles including the Department of the Treasury, the Secretary of State department, Deputy Chief of Staff and President of the World Bank. As you might suspect, he has some experience in world affairs and has personally met Putin on a number of occasions. When asked about the possibility of Putin actually invading Ukraine, he did elaborate on Putin being a throw back to at different era with aspirations of a greater Russia, but also said, he was very much a pragmatist and knows he can ill afford to alienate the west and of course the last thing he would want would be to have Russia caught in a bloody quagmire in Ukraine. While that does not assure that it cannot happen, it would seem that he will push for diplomatic solutions. This will continue to be a volatile input for the grains markets and could easily create long-term issues as I spoke of yesterday but, as is often the case, the media appears to be inflating the overall situation.
Export sales were decent for both old and new. For the 13/14 crop year we sold an additional 438k MT or 16.1 million bushels. This brings year to date up to 1.129 million bushels. With 7 weeks left in the marketing year we only need to sell an additional 46 million bushels. For the 14/15 marketing year we sold 359.9k MT or 13.2 million bushels.
If rains do materialize in wheat country over the weekend, I believe it could be a challenge to hold this market higher for much longer.
Technical – After reaching up and completing a 78.6% retracement at 7.09 ½ yesterday, May wheat reversed to close lower. While it was not an outside day and prices have bounced this morning, it may have been a warning flag that this rebound is exhausting. I have cycle dates that line up for both today and Monday if the bulls cannot regroup and push us up through the existing highs at 7.23 ½, we should be set for a second swing lower.
Fundamentals – The prospect of warmer temperatures in the weeks ahead was enough to make the bulls run for cover yesterday. Many in the trade are looking for corn planting to kick into high gear and believe that we could still have 40 to 45% of the crop in the ground by the 1st of May. We continue to hold key support levels but are walking dangerously close to the line at this point.
The ethanol numbers for last week were actually quite solid and should have provided support. For the week ending April 11th, we averaged production of 939 million gallons a day, which should equate to just over 99 million bushels of corn. This was up 4.8% over the previous week and marked the largest grind of the calendar year. Additionally, after 4 weeks of rising inventories, stocks were down 19 million gallons and actually stand at 9% below a year ago.
Export sales fell within the range of trade estimates. For the week ending April 10th, for 13/14 CY we sold 601.9k MT or 23.7 million bushels. Year to date this bring us up to a total of 1.676 billion bushels just 74 million below the target of 1.75 billion bushels. With 20 weeks left in the marketing year, this means we only need to average 3.7 million per week. For the 14/15 CY we sold 7.6 million bushels.
Technical –Yesterday, May corn pushed down again the 21-day moving average and held but this morning we have been able to violate this line, which is crossing at 4.96. Now, we could easily bounce back for the close and the selling could be reflective of bulls wishing to even up in front of this long weekend but it would appear that we are very close to rolling this market over. Cycle dates do line up through the weekend and ideally we can try and rebound on Monday. If that is the case, I will be potentially be looking at a sale at that time.
Fundamentals – The bean market continues to milk higher highs out of the same concerns and stories but I see less and less in the news that backs this up. There is talk that China has cancelled another 8 to 10 cargoes of beans from Brazil and I understand that the first vessel of beans from Argentina headed for the US is now loading.
The July/November bean spread has pushed out to an inverse of $2.70 which is not a record but I believe is the third highest ever. While it may not amount to a hill of beans, no pun intended, I have read stories that farmers in the south are looking at switching to early maturity beans to try and capture the old crop premiums. If you could harvest beans in August instead of September there is a possible $1.20 premium. Of course if the early beans yield 4 bushels less, that price premium is eliminated and with the lateness of the spring, I cannot imagine we will see much of this.
Export sales were not a marketing year low but I believe they were the second lowest at 19.2k MT or 700,000 bushels. Of course it is another 700k bushels and moves us to 59 million bushels above the USDA projection of 1.580 billion. Sales for the 14/15 CY came in at 400.7 MT or 14.7 million bushels.
Technical – Higher highs again overnight in the bean market but May futures were just a few cents shy of filling the gap on the spot chart at 14.34 ½ before turning back lower. While I suspect that sell off was inspired by the upcoming long weekend, I continue to believe this market should be extremely close to a peak. Cycle dates ahead on the 23rd and the 5th and I will be watching for confirmation and a possible sell opportunity during that time frame.
Soybean Oil – Exports sales at 5,400 MT, which leaned to the low end of estimates.
Very solid close for bean oil yesterday as May futures almost reached up to complete a 78.6% retracement at 43.94 but we found no follow-through this morning. Here as well, I suspect the long wants to take a little money off the table for the weekend but it would appear that we should be very close to completing this advance. Cycle dates line up between the 21st and 23rd and if we can kick back higher early next week we could be presented with a selling opportunity.
Soybean Meal – Export sales for 13/14 at 36,600 MT, which was well below the lower estimates and for 14/15 we sold 84,000 MT.
May meal was able to eek out a slightly higher high again this morning but has turned back lower as the day has progressed. Same situation here as in beans and meal and I believe this overall rally is just about complete. Cycle dates ahead on the 23rd and the 5th and I will be watching for a sell signal during that period.
Cotton – Export sales for the week were 84,700 rbales.
Not much feature here in the cotton market as we have remained trapped inside last weeks range. Short term we appear overbought but the intermediate indicators are nearing the oversold level so I would not expect pressure to be big or long term. Cycle dates line up through the weekend and then again on the 24th/25th.