Grains Stop the Bleeding in the Overnight Session

Published on: 08:00AM May 02, 2014

 Grain prices are drifting higher overnight in Chicago following Thursday’s free fall. Coming into the morning trade break corn is up a penny, soybeans up 5 cents, and Chicago wheat up 5 ½ cents.

Yesterday, the 49 ¾ cent July Soybean sell off was not triggered by any landslide event, but rather gathered momentum as the prices ticked lower. Sell stops were triggered as soybean prices fell through 15.00 and the selling continued into the close.  After the dust settled, funds sold an estimated 12,000 soybean contracts and 10,000 corn contracts yesterday. The hard selling in July Soybeans has damaged the chart substantially, breaking the uptrend that started in late January. However, despite the broken uptrend there is still support under soybeans around 14.60 from the previous low made on April 23rd. With the severity of the selloff seen yesterday, be mindful of a rebound in today’s session.

Yesterday, weather models pointed at improved planting conditions throughout the Midwest. Funds began evening out positions as the forecast turned drier throughout the Midwest, giving farmers an opportunity to catch up on planting in the coming weeks. This morning, it was announced that an Israeli group bought 108,000 tonnes of corn which is likely to be source from the U.S or South Africa. They also purchased 60,000 tonnes of Feed Wheat most likely to be drawn from the Black Sea region.

Kansas wheat tour projections, released yesterday after the bell, supported wheat futures into the overnight session. Crop scouts project a 2014 yield of 33.2 bushels per acre and final production of 260.7 million bushels. The state of this crop has largely been factored into prices but yesterday’s yield number may be lower than what many traders currently have penciled in. A crop yielding 33.2 bushels would be 5 bushels per acres smaller than even the poor 2013 crop.

Ukraine’s defense ministry reported that two helicopters were shot down in eastern Ukraine overnight. Traders report "business as usual" at port cities but further escalation in the conflict has the potential to hamper export logistics from the Black Sea. Following last week’s rally in US wheat futures, US export prices sit $10 - $15 higher than currently offered for Black Sea wheat. Egypt’s state grain buyer, GASC, issued a tender for 120,000 tonnes soft and milling wheat for June delivery. Considering the premium carried by US export wheat, it is expected that most sales will go to Black Sea exporters.