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.
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.
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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