Morning Comments - Tough to find much positive
May 16, 2014
Here we sit right in the middle of May and in Northern Illinois I woke this morning to be greeted by snow showers. I am beginning to get the impression that I am stuck in a real life version Disney’s Frozen. As you might expect, it is melting almost as fast as it is falling but this has been a strange spring indeed.
The wheat market is stable here this morning but after the additional pressure yesterday, I cannot imagine there are too many bulls feeling comfortable with their position at this point. On their revised estimates yesterday, Informa actually boosted overall wheat acreage 250,000 acres. Granted, this is not a big shift but it is interesting to note that the majority of the increase was in winter.
The weather outlook for much of wheat country looks favorable and with little other news demanding risk premium, i.e., Ukraine, it would appear that for now, the path of least resistance is lower.
July corn sliced through two key levels of support this week, first at 4.97 ½ and then at 4.90 ¾ and particularly when that second level was violated the gates were opened and we quickly pushed down to a very key level of support at the 4.80 mark. The question of course now is can we make a stand once again at this level? I believe the odds are stacking up against it.
The talk in the export trade yesterday was that origin optional corn that is on the books for South Korea and other Asian countries will now most likely come from Brazil. China, while it has not been a real positive influence on our corn market as of late, is for all intents out of the market for the balance of the year and there is even some discussion that with their large inventories, they could export a little corn. Harvest in Argentina is running behind schedule and is only estimated to be 30% complete versus last year at 46% but that is more related to a late planting season and will mean that there should be ample quantities available for June and beyond. The Informa acreage estimate could have been considered a little positive as they actually lowered their corn number by 110,000 acres but that is a pretty insignificant shift and they increased Sorghum acres by 880,000 which of course can be used as a substitute feed grain.
I am afraid, there is not much we can point to right now that would be considered a positive market influence outside of the slow planting pace in Northern States but even there, the forecast for next week looks very favorable. If we begin to push through the 4.80 level, I suspect that fund long liquidation could step up even more and while that downside could be limited as we move into early summer, it may be a challenge to attract that money back.
The beans bull was hoping for a positive jolt from the April crush figures and while 132.7 million bushels is nothing to sneeze at, it was by no means the kind of ammunition they were looking for. As such, we did see a pretty solid washout yesterday and while it was not quite severe enough to be called a key reversal, I suspect there are a number of bulls that may not have slept too well last night.
Informa did bump their acreage estimate up 580,000 acreage to 82.07 million, which did not stun anyone but this was at least partially masked over by a announcement of a sale of 120,000 MT of new beans to China. We all recognize that we still have basically 4 to 5 months before we harvest our next bean crop and acreage by no means assures an adequate crop, but when the record acreage number grows even larger, is would sure seems to help provide a nice cushion.
I believe the key line in the sand for July beans right now sits at 14.41 ¾ and if we violate that on a close, our top is confirmed.