We have prices trading higher as we finish this final day of trade this week. It seems like a distant memory at this point but it was only 4 days ago that the much-anticipated USDA report was released and as it stands right now, December wheat is trading higher than the close on Tuesday but not quite back to the close posted on Monday. That actually stands to reason, as the wheat numbers were predominantly neutral.
Aiding the strength overnight is the ongoing tensions in Ukraine. Russia has been sending trucks supposedly filled with humanitarian supplies and of course Ukraine is very weary of them containing something else. So far, inspections have been allowed but it is obvious that issues there will keep markets jittery for sometime to come. It is interesting to note that there seems to have been little to no impact on the Black Sea markets and trade.
I read an interesting story overnight concerning El Nino, or maybe better stated the lack of an El Nino. This could be akin to the once popular children’s books, Where’s Waldo?, but rephrased Where’s El Nino? If you remember back in late winter and early spring that was one of the topics that people could not talk about enough as predictions were for one of the largest events since the late 1990’s. That has largely turned out to be a bust but some still believe it could form in a much-reduced state later into the fall. Of course the concern was for India and Australia as there is a decent correlation between droughts in those countries and El Nino and while both have had drier than normal years, they were not droughts.
It should be interesting to see if the strength can be maintained into the close today. For wheat, outside of the unease concerning Ukraine, there would appear to be little to panic the bear.
The corn market was able to hold gains into the close yesterday and has built upon that overnight night pressing back against what has been key overhead resistance. Using the same rationale I did it wheat, it is understandable in light of the report that prices have stabilized and even bounced a bit as in the domestic numbers, the estimates were all less than trade estimates but that said, none of them could be classified as bullish. As it stands right now as I prepare these comments, December futures are 5-cents higher than the close on the report day and we have pushed to the highest point traded in 5-weeks. The big question would seem to be if we can hold this strength for the weekend close?
If we were to try and answer that question via the current weather outlook, it would seem to be a no. Over the next week, over 70% of the growing areas are forecast to receive rainfall in the 1 to 2 inch range which should really help fill out those ears. I suspect that we could also be looking at a little cautionary short covering in front of the FSA acreage data today but that is probably stretch. This looks like technical buying that is correcting a short-term oversold position and it may be tough to sustain that for a weekly close. That said, if we close above 3.74 ¾ today and even more critically, 3.78 I am not one to argue with the signal as that could lead to a push back to as high as 3.96.
All that said, the overall picture looks anything but bullish at this point. The Pro-Farmer tour kicks off this next week and if their findings are consistent with other private tours, I suspect the information will be negative. If we can catch a little additional technical bounce in the mean time, it should allow for catch-up sales for those that need to.
November beans poked in a lower low yesterday but did bounce enough into the close to finish back above the key 10.55 point and have extended a bit higher again this morning. While there was nothing shocking in the report numbers on Tuesday, they did lean to the negative side. On the close that day November finished at 10.59 ½ and this morning we are trading at 10.64.
As with the corn market, the weather forecast between now and next weekend would appear to be quite favorable for pod fill and moving this crop along. The July crush number will be released later this morning and the trade is looking for something in the 113 to 117 million bushels range.
I suspect the overnight strength is technically inspired here as well and it will be interesting to see if that can be maintained into the weekend especially in light of the weather outlook for next week.