Morning Comments - Rain (does not) Make Grain
Jun 23, 2014
We have begun this new week with a little more positive tone with grain and soy markets all in the plus column. News this morning is really quite sparse so I suspect most of the strength stems from a little growing concern about too much moisture and the fact that we have pushed markets into a very oversold position in front of the key quarterly reports on the 30th.
The United States remains uncompetitive in the world wheat trade. Over the weekend Egypt purchased 180k MT from Romania (120k) and Russian (60k) with prices $20/ton below US values. I would expect to see the ratings for spring wheat deteriorate a bit this week from the excessive moisture across the upper Mid-west and plains states.
The strength so far this morning in wheat is encouraging but so for basically inconsequential. Nearby futures would need to poke up through last weeks high at 5.98 to begin making the bears squirm. That said, we remain quite oversold and would appear to be close to posting a seasonal low and room for at least a corrective bounce.
The corn market has extended gains to the fourth day in a row and has reached back to the highest level traded since the 6th of June. The high for the month is actually all the way up at 4.70 ½. Turns out funds were back buying again this last week helping to lift prices off of what were 5 month lows.
Excessive moisture appears to be the stimulus again this morning as a number of violent storms passed through the Midwest over the weekend. I understand that in some areas around Omaha over 7 inches fell on an already saturated area and recent cumulative totals of 5 to 10 inches up in the Iowa/SD/Nebraska area have not been uncommon. With those kinds of accumulations, the water cannot get away fast enough so it is not a question of will there be damage rather just how much. The forecasts moving ahead do begin to dry out and warm up, which of course is good news as long as we do not flip to the other extreme. That seems to be in no ones outlook at this point. Look for conditions to drop 1 to 2% overall this afternoon.
The corn market was poised for a technical rebound and it would appear that we have turned the corner. This question would seem to be will we continue higher right into the June 30th reports or pull back and make a second run after the reports? While we will have to wait for the market to provide the ultimate answer, it would appear the nearby corn should have room to push back into the 4.69 to 4.79 zone and December corn into the 4.66 to 4.80 level on a corrective swing.
Beans have joined the grain markets with the bounce this morning with July futures quickly reaching back to last week’s high at 14.35 ½. While the excessively wet conditions are helping to support new crop prices, the ongoing story of critically tight inventories support the old.
There is really very little additional news in the bean trade this morning. Planting progress should have advanced beyond the 95% mark nationwide and condition this afternoon could show us a little deterioration as well. As I commented last week, the big number that everyone will be looking at next Monday will be the June 1st bean stocks. Will the USDA find more inventories? The performance of the cash market would tell us that should be the case but we shall have to remain patient to find out if correct and if there will be a comfortable enough supply to reach into new crop availability.