The grain markets are gearing up for end of month, end of quarter and the USDA Prospective Plantings and Quarterly Stocks reports. That could lead to some volatility to end March.
Oliver Sloup, Blue Line Futures, says the USDA Ag Outlook Forum set the benchmark for acreage showing a nearly 4 million acre increase in soybeans and 3.6 million acre decrease in corn. So that is already priced into the markets.
“I know some people are talking about corn acres coming in north of 93 million acres. I think that’s the big one we’re going to be keeping an eye on. I think if we do come in at anywhere close to 93 or above 93 that’s probably going to put a lid on things,” he says.
As the grain markets head into the end of the month and quarter will hedge funds or speculators cover their hefty, short position in the grains and take profits? Sloup says they bought back some of those contracts this week. “But I wouldn’t be surprised to see them continue to do that with uncertainty of U.S. production kind of looming over the market. We know that they got very extended on the short side, and we’ve seen what can happen when they get overextended in one direction.” He referred to examples of that in 2019 and 2020 that produced strong relief rallies.
Soybeans saw significant losses on Friday of 17 to 20 cents, on profit taking. Sloup says the market had a technical failure and lack of follow through buying on Thursday and so funds sold to end the week. Soybean meal and bean oil also fell and he says April option expiration also played a role as the trade gravitates toward psychological round numbers like $12.00.
Wheat staged an impressive rally on Friday in light of the strong U.S. dollar index. Sloup says most of the action was technical. “We had a purge of bad news and had some short covering at the end of the week which I think is really encouraging.” All three wheat exchanges were also higher for the week.
Corn was caught Friday between higher wheat and lower soybeans. However, he says the corn market has been the most constructive of the complex. “Corn has shrugged off a lot of bearish news and volatility we have seen in these other markets. We got a breakout above the 50-day moving average on Thursday’s trade and the market is trying to carve out higher highs and higher lows and so far, is succeeding in doing that.”
