The grain markets have stabilized after a choppy trading session yesterday; it looked as if the wheels would fall off of the corn market early in Tuesday’s session, however a wetter midday forecast had shorts running for cover by the close. Despite the increased rain amounts, conditions should still be conducive to corn planting during the next couple of weeks. Rains will be limited while warmer temperatures are on their way. The market is beginning to shift some focus toward Friday’s Crop Production report from the USDA. The trade is not expecting any big surprises; however that hasn’t stopped the USDA from dropping bombshells in the past. Sources in the cash market continue to reiterate physical tightness in corn, and to a greater extent, soybeans. Nearby spreads are trading near record highs; May vs. July is trading +37 this morning, May vs. July soybeans at a record-high +84 cents.
Chinese government sources reported April soybean imports at 3.98mmt vs. 3.84mmt in March and 4.88mmt last year. Year-to-date Chinese bean imports are down about 15% from this time last year. May soybean imports are forecasted at 5.65mmt. Some analysts believe that imports during the May to July period will set a record, as delayed vessels from South America begin to arrive in China.
Analysts look for Argentina corn and soybean output to drop on Friday’s report. Argentina soybean production is expected at 51.0mmt vs. 51.5mmt last month; corn production is expected at 25.5mmt vs. 26.5mmt last month. Brazilian corn production is expected to be revised higher; analysts look for a number near 75.3mmt vs. 74.0mmt last month. Brazilian soybean production is to drop slightly to 82.9mmt vs. 83.5mmt last month.
The EIA short-term energy outlook suggested a modest recovery in ethanol production in April. Average output was near 840,000bpd. The recovery was fueled by increasing RFS targets and strong demand for RINs.
Outside markets are mixed this morning; gold higher, equities higher, crude higher, bonds and the US$ both lower. It’s been a quiet a quiet week on the macro-economic front, leaving the grain markets to their own devices.
Weather markets are difficult to analyze and even more difficult to trade. Our technical view of both new crop corn and soybeans remains negative; the charts always tell a story, and the story is bearish for the time being. Any projection of the 13/14 balance sheets is akin to throwing darts at a board at this point in time. Not only can analysts not predict what type of production we’ll see this year, they can’t predict what type of demand we’ll see this year. It’s all up in the air. In a perfect world, farmers and livestock producers would have no bias whatsoever in regard to these markets; all marketing decisions would be based on profit margin and nothing else. Grain producers, especially, really have nothing to go on right now when it comes to marketing. A close examination of profit margins is the only foolproof method at this point in time. That is the best marketing advice we can provide until we know more about the crop.
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