Morning Comments - On to weather
Apr 11, 2014
Fundamentals – We have reached the end of another trading week and the overall news is fairly quiet this morning. We have actually had more than our fair share of government revisions and announcements over the past 10-days so a little breather here is welcome. The focus for should now increasingly turn to weather.
The most recent weather updates that I have seen move much of the Midwest back to cooler than normal temperatures late this weekend and the latest 6 to 10 day forecast offers more of the same. There is moisture that comes along with the colder temps but it would appear that for those in the far Northern Plains, that could come in the form of white moisture.
I understand that crop insurance adjusters are beginning to make their way into winter wheat fields so we should begin receiving updates as to the amount of abandonment this year. If this is higher than normal, will that mean later group beans being planted on that acreage? This possibility would exist but of course beans will need some moisture as well.
I read this morning that planting progress has picked up very nicely in Ukraine and while much of the wheat they produce is winter, spring wheat planting has reached 95%. Evidently the political unrest has not impacted Agriculture as some feared.
The wheat market remains in a corrective swing lower and I suspect could continue working south through much of the balance of this month.
Fundamentals – The corn market really did an admirable job of bouncing away from its lows yesterday in face of the pressure in the wheat and beans but that could have partially been spread trade. There are scattered reports of planters rolling across the Midwest and certainly a fair amount of anhydrous being applied but with the moisture forecast to move in over the weekend, overall progress should not be significant. While temperatures are expected to remain cool and moist through most of next week, some models are calling for that pattern to change by a week from now, and if correct, it should not take long to kick the spring work into high gear.
Conab issued revised Brazilian crop estimates yesterday and boosted their corn estimate by 270k MT to 75.5 MMT. Not a large adjustment but note that this number is 3.5 MMT higher that the most recent NASS/USDA estimate.
One final note this morning. JCI China has reported this morning that the Syngenta strain MIR 162 could be very close to approval for import. Evidently China has the last crop finally managed at this point.
Corn is struggling a bit this morning but nearby futures continue to hold above the 5.00 level. While there could be room for a little more push to the upside, I continue to feel that this 5.10/5.30 zone will be significant price resistance and it would most likely require a weather issue to see much if any additional strength beyond there. While there will always be a possibility of a weather related bounce, if that is what you are holding out for, that is realistically not sound reasoning for a market program nor would you necessarily be able to capitalize on such an event either. As the old saying goes, the greedy become needy.
Fundamentals – It would appear that we have some very tired bulls here in the bean market as prices have backed up now for the past day and a half. While we have not done anything that would threaten the overall uptrend just yet, this market is going to need to be refreshed with some positive news fairly soon or is liable to topple over from its own weight.
Reuters printed a story yesterday China has defaulted on another 500k MT of beans, which could be both US and Brazilian origin. I guess that should not be a shock as we will likely hear this time and again through the middle of the summer, but on a slow news day it does attract more attention. The overall economy appears to continue to slow in China, which psychologically at least will hang over both commodity and equity markets.
Conab raised their estimate for Brazilian beans as well, pushing it up 640k MT to 86.1 MMT. This compares with the most recent NASS/USDA estimate of 87.50 MMT and was reflective of a slight boost in the acreage.
As I have commented previously, I believe the 15+ level in nearby beans and the 12/12.20+ level in November futures should be a point of significant resistance and baring a serious weather issue, could be very difficult to reach beyond.