The Grain Hedge Team provides a macro-focused daily view of the world’s grain markets. Kevin McNew received a bachelor’s degree from Oklahoma State University and his master’s and Ph.D. degrees in Economics from North Carolina State University. He spent 10 years as a Professor of Economics with the University of Maryland and Montana State University focusing on commodity markets and is widely regarded for his ability to boil-down complex economic situations into easy-to-understand concepts for applied life.
Grains Recover on Light Overnight Trading
Jan 18, 2013
Grain prices were modestly higher across the board overnight helping erase part of the losses from Thursday’s day session.
After a steep runup following last week’s fresh supply and demand data, grain markets turned lower on Thursday even in the face of seemingly bullish news. Soybeans ht a marketing year high 1.6 MMT of export business for the weeks led by aggressive soybean purchases by China. In addition, USDA announced a daily sale of 240,000 MT of beans to unknown destinations on Thursday. Corn even fared well posting a 393,000 MT week after successive sub-100,000 ton weeks of late. Wheat managed a good showing as well with 536,000 MT for the week.
The soybean market continues to try to balance exceptionally strong near term demand with the prospects of a record large crop in South America. Nearby March futures has traded up to key resistance at $14.50 in recent sessions but has backed off and currently sits at $14.35. It will be important for this market take out that level to keep the bullish enthusiasm in check.
For corn, it too has stalled out at key resistance of $7.34 but we think ultimately it needs to trade back to the $7.60 mark of the fall on March futures to curb demand. With livestock feed use being stronger during Sep-Nov than expected by USDA, it seems likely that prices need to eclipse the $7.60 mark that was traded during that time period.
In the wheat market, dryness in the U.S. Plains continues to keep prices supported, but competition from India keeps prices from running too far. India’s government has burdensome stockpiles of wheat that it needs to unload on the world market before the next harvest. Indian wheat is cheapest at the moment and it has very successfully replaced Australian wheat in the animal feed market. India is poised to triple wheat exports this year to a higher-than-expected, record 6 million tonnes, helping plug a shortfall in lower-quality grain supplies and keep a lid on global prices.