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The grain markets once again finished the week on a strong note.
The corn market struggled early in the week as values slipped $.18 from last Friday’s close before solid export announcements on Thursday and Friday allowed corn prices to charge back with a $.25 late week rally that had corn closing $.10 higher for the week.
The soybean market was consistently strong all week with the only exception being a slightly lower close on Thursday because of unwinding of soybean/corn spreads and soybean/wheat spreads. Demand for U.S. soybeans combined with continuing lower production estimates from South America were the driving forces behind a March soybean close $.38 ½ above last Friday’s settlement.
The Chinese delegation signed a letter of agreement this week to purchase over 12 MMT of U.S. soybeans over the next year. This agreement was largely symbolic, but it provided some late week support, especially when it was announced on Friday that China had started that purchasing program with a sales announcement of nearly 3 MMT of US soybeans.
The wheat market was not void of its own bullish demand news as the week progressed. It was announced on Thursday that Egypt had purchased US wheat, only to be followed up with a sales announcement on Friday of 2 cargoes of US wheat that was sold to an unknown buyer. The wheat market also was able to gain support from late week rumors of Chinese interest in US wheat. Perhaps the recent sales and certainly future sales can be tied to the late week announcement that Ukrainian Grain Traders have agreed to limit wheat exports through July.
It was a busy week in the grain markets as significant fresh information was revealed almost daily. The markets will get a breather with a 3-day weekend, but look for the high volatility to return next week.
The corn market has a rationing job to do. U.S. stocks are relatively tight and getting tighter based on the current pace of exports and the pace of the amount of corn used to produce ethanol. There are some that will argue that the rationing process can take place at current levels without the need to move significantly higher. They may not be wrong.
However, the market may very well grow impatient with the current demand pace and put together a spike to prices in the coming weeks in order to accomplish this task more quickly. It is this scenario that I believe will play out in the weeks ahead.
(click the charts below to enlarge)