Grains, soybeans turn to weather for price direction

April 8, 2014 01:33 AM
Grain & Oilseeds Report

Corn(CBOT:CK14): Trade certainly put heavy focus on the Monday morning weather maps. Even with trade expecting a slightly bullish USDA report on Wednesday, this corn market spent most of the day moderately lower on a slightly drier forecast. As of Monday, the forecast update showed a 15-day forecast where temps were above average all but three days with light rains in the one- to five-day forecast, moderate rains in the six- to 10-day forecast and heavier rains in 11- to 15-day. On all but the extended maps, the forecast was helpful for a normal planting pace.

Ethanol, which had recently made a strong surge higher, has cooled back off to more “normal” levels in the last week. Trade has not reacted to this ethanol drop just yet but it is worth keeping in mind along with the weather.

On Wednesday, trade is looking for carryout to drop from 1.456 to 1.403. This is an expected and small change, which means that 80% of our focus should still be on spring weather.

If you are a producer who is really going to see delays, look for a couple more weeks of support. If you are realistically going to start planting on time, look for lower trade. This is the time of the year where producers know more than trade what the short-term direction will be…Ryan Ettner

Soybeans(CBOT:SK14): The beginning of the week started just like we finished last week, with liquidation of the bulls spreads dominating the trade action. With the Goldman Roll beginning today, no doubt some in the trade were front running the roll.

News that China had bought 120,000 tonnes of new-crop beans did provide some support for the new crop. The weekly export inspections come in at 509,603 tonnes, down a shade from last week’s 507,533 shipments. Wednesday, the USDA will be updating its supply/demand tables.

Allendale is looking for the old-crop ending stocks to drop by 10 million bushels. We look for the USDA to raise exports by 20 million bushels and offset part of the increase by raising imports by 10 million bushels. The average trade estimate for ending stocks is 139 million bushels with the range being 125 to 147 million bushels. Last month the USDA estimated the ending stocks at 145 million bushels. The average trade estimate for world ending stocks is 70.14 mmt with the range of estimates being 68.5 to 71.9 mmt. Last month the USDA estimated the world ending stocks at 70.64 mmt. The trade is looking for the Argentina bean crop to be estimated at 54.15 mmt. Last month the USDA estimated the crop at 54.0 mmt. As for the Brazilian crop, the trade is looking for it to come in at 87.43 mmt. Last month the USDA estimated the crop at 88.50 mmt.

We look for a choppy Tuesday as buyers will be positioning for Wednesday report. Bear spreading will probably be seen again as the Goldman Roll will be in full force. but with the trade anticipating a “bullish report,” breaks should find support…Jim McCormick 

Wheat(CBOT:WK14): Wheat finished Monday higher as rains were disappointing in the plains and a lack of moisture continues to concern farmers. We are also expecting to see ratings much lower than where they were when we entered into dormancy in the fall.

This drop is usually something we will find, but we need to keep in mind rains over the next two weeks will benefit the wheat crop. There are rains in the forecast for the Plains in the 11- to 15-day forecast but these totals continue to be disappointing, and if they remove this system the wheat crop could look really start to show some of the recent stresses.

The Ukraine situation doesn’t appear to be escalating much, but there are some new riots taking places in new Eastern cities, which are continuing to cause unrest as Pro Russia citizens are continuing to promote ideas of being absorbed into Russia. Export inspections were positive as we were above estimates, which could be a result of the stability of U.S. exports compared to those of the Ukraine.

We look for some higher trade as we are sitting around the long-term uptrend and though we broke that trend, we didn’t do it by a large enough margin that it cause funds to cover positions. Funds did add contracts last week, so we continue to look for more upside trade moving forward.

About the Author

Ryan Ettner is a registered commodities broker and grains analyst at Allendale, Inc. Steve Georgy is a Sr. Broker/Manager at Allendale, Inc. Jim McCormick is Senior Broker/Manager at Allendale, Inc. Allendale is registered with the CFTC and NFA and is a member of the NIBA.