The grain markets are sharply higher again this morning, as soybeans continue the rebound that began on Wednesday. Short-covering rallies of this sort can be quick and violent, as seen in years past. It is not unreasonable for nearby soybean contract to make a run at $16.00 area sometime during the next several sessions. The 50% retracement of the break that occurred from the early September highs to the recent lows would be near $16.37. The corn market has firmed up as well despite signs of weakening demand. Export sales yesterday were poor once again for corn, while weekly ethanol production softens. The feed sector is questionable at best. Still, basis levels in the Eastern Corn Belt in particular have been excellent throughout harvest, a signal that local elevators and processors are willing to pay-up for grain. There has also been talk of Brazil corn premiums increasing. Nearby Chicago wheat contracts are up again some major trendline resistance on the charts this morning. A close above $9.00 in the December contract could cause short covering and a run at the year’s highs, which were set in early July.
Ukraine Ag Minister announced overnight that wheat export will be banned starting on November 15th. Only 5mmt of wheat exports will be allowed. This is likely the main cause for the significant pop in wheat prices this morning.
Informa will release estimates for 2013 acreage this morning around 10:30am CST. Informa’s estimates on just about everything recently have been bearish relative to the rest of the trade.
The USDA ag attaché in Brazil estimated 12/13 corn production at 74mmt, which would be up from the 70mmt on the October Crop Production report. Exports are estimated at 17mmt vs 16mmt on October report. Argentina estimated their 12/13 wheat wheat crop at 11.5mmt, down from 13.2mmt last year. Corn planting is 31.8% complete vs. 24.9% last year.
Outside markets are mixed this morning. Crude oil is up marginally along with bonds. Equities, metals and the Euro currency are marginally lower. The stock market has been strong the last couple of days on better-than-expected earnings from some major companies. Existing home sales data will be released at 9:00am CST.
Moving forward, we see no reason to step in front of this rebound rally in the grain markets for the time being. These moves generally last a little bit longer than most expect, as money moves and fund managers adjust positions. There is certainly still a valid bullish argument in regards to Chinese demand for soybeans. Although some believe that a portion of the demand will be shifted to either South American or the 13/14 crop year at some point down the road, we’re now saddled with some very large export numbers. We’re skeptical of the rally in the wheat and would embrace and opportunity to sell the December Chicago contract above $9.00/bu.
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