Morning Comments -Full - What will Uncle Sam have in store for us?

Published on: 08:00AM May 09, 2014

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Wheat

Fundamental – Overall markets are in a holding pattern as we await the USDA numbers.  The wheat market potentially carries the risk of a surprise if there were to be one today.  As I commented yesterday, there are some analysts that think the Hard Red production number could be cut to as low as 700 million bushels.  Over the past several years the USDA has been none to shy about making big changes but I would be surprised to see that large of a cut this early in the year.  

The average trade estimate for All Winter Wheat stands at 1.468 billion bushels, All Wheat at 2.046 and a projected ending stocks figure of 588 million for 13/14 and then 553 million for 14/15.  The domestic number that will be most closely watched will be Hard Red Winter and the average estimate is 782 million. The average estimate for the 13/14 World ending stocks is 185.95 MMT and for 14/15 184.53. 

Little seems to have changed in Ukraine and I suspect we will hold at least a certain level of risk premium through the general elections on the 25th.  Realistically, I do not imagine much will be settled even on that date and we can probably expect to see years if problems there.  As a side note, I happened to meet a woman last night who was from Ukraine and her husband was from Russia.  From the sounds of it that have some very interesting discussions around the dinner table.

Technical – While we know that the reports in the morning could be the driving force for higher or lower prices, from a purely technical standpoint it still appears that we have potential to extend up from here.  With intermediate and long term indicators nearing in on the overbought zone, I would not expect it to be an extended run but believe July futures could still make a stab at the major 50% retracement of 7.72.  Cycle dates ahead between the 12th/14th.   

Corn

Fundamentals – The corn market posted a nice turnaround from the early weakness yesterday but appears to be treading water at this point.  I would not really expect to see any shocks in the report tomorrow but as an ex-boy scout I was taught to be prepared for the unexpected. 

I am sure this sounds redundant by now but the average estimate for 13/14-crop year ending stocks remains at 1.314 billion. We could see export estimates bumped up 25 to 50 million bushels balanced out by adjustments in the feed/residual numbers.  14/15 crop year ending stocks are estimated to be 1.672 billion with the wild card there being the yield number that the government uses.  Current year World ending stocks are expected to be 157.31 MMT and for 14/15 159.41 MMT. 

Once we have moved past these numbers the most of the focus should shift over to weather again.  The latest forecasts have moisture moving across many parts of the Midwest from the weekend into the middle of next week but the does not appear to be any major events that would bring planting to a complete halt.  In fact, with the amount of crop that should have gone into the ground this past week, we cannot be too far from the time when the attitude will be rain makes grain. 

Technical – The corn market hangs in limbo at this point.  We have been chopping in a semi-sideways pattern now for the past 6 weeks searching for something to move us in one direction or the other.  Short-term indicators are overbought and I suspect it would take something quite friendly to lift us up through the top.  As I have commented previously, there remains a possibility that we could still make a stab at overhead targets around 5.30 but I believe we are in the waning moments of this rally.  Cycle dates ahead on the 12th, the 19th/22nd and then the 30th/3rd

Soybeans

Fundamentals – The bean market caught a nice wave of short-covering and fund buying yesterday.  This was enough to pull us back above key support levels but does little to change the overall outlook right now. 

We shall see what the USDA has in store for us in just a few hours but as I commented yesterday, most believe adjustments will most likely cosmetic.  The average estimate for the 13/14-crop year ending stocks is 134 million bushels, down 1 million from last month.  The average estimate for the 14/15 ending stocks is 307 million bushels and if correct would be the largest ending inventory number since the 2006/07-crop year. In the World figures the trade is looking for 13/14 ending stocks of 69.77 MMT and for 14/15 a new record estimate of 80.34 MMT. 

Technical – Beans are still enjoying a minor technical bounce and with the overnight strength, July futures have been able to reach up and complete a 38.2% retracement of the recent slide at 14.72.  The daily oscillator is still pointed up and unless Uncle Sam provides something negative later this morning, it would appear that we have room for another couple days of advance and possibly a push against the 14.78/14.81 level.  Cycle dates ahead between the 14th/16th

Soybean Oil – July bean oil also has a minor corrective bounce underway.  With the overnight strength we have posted a higher high and with oscillator pointed higher we should have potentially a couple days more. Ideally we will make a poke up into the 41.95/42.35 retracement range into early next week.

Soybean Meal – July meal posted a nice bounce yesterday but has seen absolutely no follow-through in the overnight trade.  Here as well baring something overtly negative from the government today, we should have room for a couple more days of corrective strength.  Look for tough resistance between 482 and 489. 

Cotton – July cotton has been treading water now for the past couple sessions and appears to be waiting for the USDA releases later this morning.  The technical picture has turned negative but we seem to be in no hurry to move out of the existing trading ranges.  I have cycle dates lining up through this weekend and then the 180-calendar day cycle count from the November low sitting out on the 21st

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