No Clear Signs Of Lows Yet

April 26, 2013 01:17 AM
 

What Traders are Talking About:

Overnight highlights: As of 6:15 a.m. CT, corn futures are 2 to 4 cents lower, soybeans are mixed in old-crop contracts and 4 to 7 cents lower in new-crop contracts and wheat futures are 1 to 8 cents lower with Kansas City contracts leading declines. Based on overnight trade and a lack of fresh supportive news, grain and soy futures are likely to favor a weaker tone when today's session begins at 8:30 am. CT. Cattle futures are expected to open with a mixed tone as traders await cash cattle trade, while hog futures are seen opening with a steady to firmer tone.

 

* Lack of followthrough overnight. Grain and soy futures finished strong Thursday, with winter wheat and old-crop soybeans leading gains. Wheat was fueled by crop concerns in the Plains, while soybeans were supported by tight supplies and talk of some additional demand amid ongoing shipping delays in Brazil. But the lack of followthrough buying overnight suggests yesterday's price strength was mostly corrective buying. If the previously mentioned factors were high on traders' priority list, there would have been some followthrough buying.

The long and short of it: The upside remains limited to corrective buying until there's a strong fundamental catalyst -- and attitudes shift. While there are some bullish fundamental reasons, traders attitudes haven't shifted.

* HRW abandonment estimates on the rise, crop forecasts declining. HRW abandonment estimates are on the rise, with many private crop forecasters looking for at least one-quarter of the crop to be written off after the string of spring freeze events. With acreage abandonment on the rise, crop estimates are shrinking. There has been a lot of talk this week among private crop forecasters that HRW production could start with a "7." The bulk of private crop estimate now seem to fall within the range of 750 million bu. to 850 million bushels. The market will get better "ground truth" next week when the Wheat Quality Council runs its annual HRW tour through Kansas and far southern Nebraska. Concurrent tours will run in Oklahoma and eastern Colorado.

The long and short of it: HRW crop concerns are well documented, but traders have been slow to respond. Yesterday's price action was the first hint that traders may be ready to build weather premium into wheat futures. That urgency may rise next week when HRW tour results hit the market.

* CME declares force majeure on Illinois River. CME Group on Thursday declared force majeure at grain terminals on the Illinois River due to flooding. Under exchange rules, if barges cannot be loaded at a majority of shipping stations, then shipments may be delayed for the duration of the problem.

The long and short of it: The inability to load grain along the Illinois River is potentially important with the start of delivery for May corn and soybean futures on April 30. But with few (if any) deliveries against May corn and soybean futures expected, this should not be a major market factor.

 

Follow me on Twitter: @BGrete


Need a speaker for a seminar or special event? Contact me: bgrete@profarmer.com

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