Morning Comments -Full - Waiting on Uncle Sam
Apr 07, 2014
Fundamentals – It seems that anymore we leap from awaiting one government report to the next and to begin this week, traders are looking out to the Wednesday Supply/Demand estimates. The wheat market is higher this morning and would appear to be reflecting the lighter than hoped for rains that fell to the west of over the weekend and a shift back to cooler temperatures on the overnight weather updates. That said, after two weeks of declining markets, we are probably entitled to at least a short corrective bounce.
For the Wednesday report, the average trade estimate for ending stocks is 583 million bushels vs. the March estimate of 558. The range of estimates are 553 to 625 million.
Estimates for todays export inspections sit between 15 and 20 million bushels.
Technical – After touching down to complete a 38.2% retracement at 6.58 ½ on Friday, May wheat bounced and this morning we have been able to rally enough to post a higher high for the first time in the past 7 sessions. I would like to think that we have room for 3 to 5 days for rebound action with potential to bounce back into the 6.83 to 6.91 retracement range, for what should be a B wave correction. Cycle dates line up for the 10th /11th and strength into then could present a selling opportunity.
Fundamentals – The reversal higher posted last Friday did not carry-through into this morning but the pressure is pretty insignificant at this point. I have to believe the shift back to cooler temperatures on the overnight weather updates as well as predictions for additional moisture falling across the south should be supportive but we could be poised to just tread water between now and Wednesday.
As I have commented previously, it would not be surprising to see the USDA boost both exports and residual usage for corn by a combined 100 million taking the ending stock below 1.4 billion. For the report, the average estimates for corn ending stocks stand at 1.403 billion with a range of estimates between 1.306 to 1.478. World corn ending stocks are estimated to be 157.72 MMT with a range of 156.5 and 159.2. Last month this number stood at 158.47. For the South American production, Brazil is expected to come in at 69.66 MMT, down .35 MMT and Argentina at 23.95 MMT, down .05 MMT.
After those figures are released the focus should almost be entirely about weather but as we have learned many a time, it is difficult to generate extended swings particularly to the upside related to spring weather. We can just put the crop in the ground too fast.
Export inspection for least week are expected to be in the 35 to 45 million bushel range.
Technical – May corn posted an outside higher reversal last Friday but found no follow-through strength overnight. That said, short-term oscillators are oversold and we remain well entrenched in the overall uptrend and could very well continue to hold around this 5.00 level for several more days or even make another attempt to stab into higher highs. That said, after 3 months of rally, we are in need of a corrective pull back. After today, the next cycle date ahead sits on the 14th.
Fundamentals – Bull spreads are at play again this morning in the beans trade, which would seem to be a very normal reaction with the situation we are confronted with for now. China continues to work at selling back previous purchases now out through the summer months and South American cash markets continue to slide lower. I understand there will be a Brazilian cargo that will come into the gulf this week for unload.
The USDA will need to be shifting a few numbers around on Wednesday’s report and I suspect both exports and imports will be boosted. The average trade estimate for the ending stocks is 139 million bushels, which would be 6 million below the March estimates. The range of estimates runs from 125 to 147 million. World ending stocks are expected to be down .50 MMT to 70.14 with a range of 68.5 to 71.9. Finally, the average estimate for the Brazilian crop is 87.43, down just over a million from last month and Argentina at 54.15 up .15.
Export inspection as estimated to run between 8 and 12 million bushels.
Technical – May beans have witnessed a little two-sided action this morning and for now, remain trapped into our new trading range between 14.60 and 15.00. Short-term oscillators are at the oversold zone so I do not suspect that we are ready to flush to the downside yet and will look for choppy trade congestion trade at least through Wednesday and easily into the next cycle date on Friday. As I have commented previously, we could be in-store for choppy somewhat sideways action between now and the 270-calendar day cycle count that sits out on the 5th of May.
Soybean Oil – May bean oil has seen two-sided overnight trade as well but so far remains within Friday’s trading range. Short-term oscillators are quite overbought and teetering on the edge of turning lower and it would appear that we have room for additional downward corrective action. There should be solid support down around the 40.60/40.30 zone but a close below the lower end would open the door for a push down to 38.80. The next cycle date ahead is on the 11th.
Soybean Meal – Two-sided overnight action in meal but this market is looking a bit more supportive than oil. The daily oscillator is oversold and it would appear that we could be set for another attempt to push through the upper side and potentially a run into the 490/493 zone. Cycle dates ahead on the 10th/11th.
Cotton – Good two-side action in cotton as well and while it would appear that the bears have the upper hand right now, we remain within the current trading range of 93.75 to 90.50. My intermediate indicator continue to point lower and I do believe we will eventually push through the lower end but short-term we remain oversold and could stand to see a rebound first. The next cycle date ahead falls on the 17th.