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The Ag Outlook Forum revealed some much expected market data this week.
It was a relatively quiet week in the grain trade this week. This was in spite of a deluge of information from the Ag Outlook Forum, as well as solid demand news.
March corn and March wheat established their weekly trading ranges on Tuesday following the three day weekend.
Soybeans on the other hand continued its steady climb higher on the back of strong demand and persistently lower trade estimates from South America. The soybean market seems destined to test the $13.00 level early next week.
It is a market that will not likely find a top until the lowest estimates of the South American crops have hit the marketplace. This may occur around the March 9 WASDE Report. Meanwhile, the soybean market may continue a march toward the $13.50-$14.00 level over the next few weeks.
The corn market continues to be supported by an ethanol production pace that exceeds the current USDA estimate by as much as 150 million bushels. In addition, it was announced that China has re-entered the US corn market. The price of domestic corn prices in China was a hot topic this week, as they approached their highest prices ever.
The historically high Chinese corn prices continue to raise the floor under the old crop corn values, as they must try to remain at a level that limits that export demand as best they can.
The Ag Outlook Forum revealed some much expected market data this week. It confirmed the worst kept secret in the grain markets, that with 94 million acres of corn and a trend line yield of 164, carryout will double and prices will decline.
The first job of the market is to secure those 94 million acres, a task that will become more difficult with December corn below $5.50 and November soybeans approaching $13.00. It is for this reason that I expect good support to December corn next week.
The spread between old and new crop corn values will likely continue to widen, but at a slower rate than we have seen this week. A rally to $6.80 in May futures will drag new crop corn values toward $5.85 where producers should look to advance sales.
(click the charts below to enlarge)