Old crop wheat gained on corn and soybeans Wednesday in what appears to be a liquidation day. Looking at the Commitment of Traders report from last Friday, the managed money is net short 46,286 contracts of Chicago Wheat, net long 62,864 contracts of Corn, and net long 128,286 contracts of Soybeans. Naturally the heavy bearspreading of soybeans and corn in combination with the bullspreading of wheat can be associated with fund liquidation knowing where they currently stand position wise.
Spring CIF basis levels have been falling for corn and soybeans and the prospect of China holding out for Brazilian beans has left many bulls leery to hold/add to positions. NOPA will release their domestic crush estimates on Friday which the market is looking for about 140 – 143 million bushels. Weekly Export Sales will be released Thursday at 7:30 am. Estimates are as follows:
Corn 200,000 – 500,000 MTs
Soybeans 700,000 – 1,000,000 MTs
Wheat 200,000 – 500,000 MTs
Wednesday’s headlines did not provide a whole lot of fresh information for grain direction. We did see the announcement of 114,300 MTs of old crop Sorghum to "unkown". Obviously end users are looking for alternatives to corn. Also the Weekly EIA report showed ethanol production down 8000 bbl to 797,000 bbl per day. The ethanol stocks were also lower by 0.7 mln bbl. There were rumors floating that Brazil would be eliminating a tax credit for soyoil which would potentially be negative for price action.
The corn-to-soybean ratio is still correcting from its massive rally this winter when soybeans gained sharply to corn. The new crop spread is back to 2.27 to 1, just below the 20 day moving average. This spread will be important to watch for the next 30 days.
Chart: 2013 Soybeans / 2013 Corn
Our long term outlook remains negative for the new crops. We want to remain hedged but still allow for plenty of upside should any weather problems arise. Please contact us with any questions or to review your current marketing plan in our proprietary farm management marketing software - AgYield.
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