Mostly Lower Overnight, US$ Rallies...
Feb 16, 2012
· Grains mixed overnight with soybean lower across the board, corn and wheat mixed; Corn closing below key support at 6.28 yesterday, making a new 3-week low; Some estimate that over 100k new longs came into the market during this timeframe, all of which are now “underwater” on their positions
· Recent soybean strength a precursor to Chinese purchase yesterday; China inked deal to buy 8.6mmt of US beans and are expected to purchase even more in the following days (spread traders, not action in X12-N13 spread as of late)
· Deal with Argentina will allow China to purchase corn from them for the first time ever, providing some competition for the US
· Rainfall deficits since the end of Jan are between 3.75” and 5.5” across much of Brazil and Paraguay according to our lead forecaster; More heat and little rainfall to continue through Monday
· 6.12-6.15 area next major support for March corn; Many technicians turning negative after yesterday’s weak close; N-Z corn spreading working on downside breakout this morning, trading near +71 after sitting in a range from +75-85 for a couple of weeks
· Wheat follows corn, no further analysis needed (we believe that wheat will gain significantly on corn at some point in the not-so-near future, timing will be key)
· S. Korea buys 3 cargoes of US corn totaling 210,000mt for May/June
New crop soybean vs. corn spreads have moved drastically higher over the past couple of weeks, leaving many wondering what type of impact the ratio change may have on acreage. Traders seem intent on buying some acreage back for beans, although most still believe farmers plant 94+ million corn acres. The reality of the situation is that spring weather patterns may have just as much to do with acreage allocation as the recent move in price ratios. A dry spring and early planting would certainly result in more corn acreage while a slow, wet planting season would result in more beans, which can be planted later. There is definitely more than one piece to this puzzle. Seasonal trend follow look for some weakness during this timeframe ahead of the standard seasonal spring rally in March/April. Bulls beware today as the US$ rallies and outside commodities show weakness.
As always, call the office with questions or concerns.