Weather, reports and Ukraine keep grain traders guessing

April 14, 2014 06:22 PM
Grain & Oilseeds Report

Corn: Thanks to rains over the weekend and the forecast for three cold days in the Midwest, the corn market was able to find early support. Given that the forecast only calls for three to four cold days followed by another warm up, the buying was on a limited basis, unable to even reach Friday’s highs.

With funds quiet and weather offering only small bounces, both old and new crop corn could be stuck just above the 500 level until larger news is seen. At noon, the one- to five-day and six- to 10-day forecasts did reduce rains, which will also encourage selling of bounces on thoughts that planting may only end up slightly delayed.

During the day-trade hours, analysts expected Monday’s first planting pace number to come in at 3% complete vs. the five-year average of 6-7%. While bulls will make the case that this is truly “delayed,” they had better hope for even more rain before expecting too much of a bounce. Bears will quickly sell bounces but also need to recognize that heavy support appears just under the 500 level. To start the week, more general sideways trading is expected until later planting progress reports can show a true delay or active planting where a breakout will finally be seen…Ryan Ettner

Soybeans: The soybean market caught a bid Monday, even though the major news that would seem to move the market was absent. The monthly NOPA crush will be released Tuesday and that is anticipated to be bullish so that might have provided some support to the market. The weekly export inspections came in at a disappointing 267,939 tonnes. The trade was looking for inspections to come in between 325,000 and 425,000 tonnes. Last week inspections came in at 509,603 tonnes.

Tuesday, NOPA will release its estimate of March soybean crush at 11 a.m. Central. The trade is expecting 146.1 million bushels. If so, that would represent a strong number at 7% over the previous March. That would help push the September to March total at 1.3% over last year. USDA’s current September to August estimate is 0.2% under last year. If the crush comes in at the trade estimate it would mean that the rest of the year’s crush would have to run 3.2 % below last year’s low crush number to reach the USDA current estimate.

News out of China continues to point to more soybean defaults down the road. The consensus is that 2 mmt of beans will probably be defaulted on. It is just a matter of timing.

Allendale does not recommend chasing the bean market higher as our price targets for old crop soybeans were filled weeks ago. As for new crop, we expect sharply lower price action to develop after planting. Our downside target is $9.25 for November…Jim McCormick

Wheat: Wheat finished higher Monday after we watched the situation in the Ukraine escalate and rains were disappointing in the U.S. plains. There were concerns about acres being abandoned, which could artificially inflate yield while at the same time decrease production. We were expecting a further decline in overall ratings as Texas and Oklahoma wheat continues to be reported as disappointing.

We are still trading above the long-term uptrend line and until we see this line break we are still expecting this market to move higher.

Russia is continuing to show interest in taking over additional portions of the Ukraine, and this does represent a portion of their grain production and the Ukraine doesn’t have much they can do to fight back. The export market in the United States is still firm as we have seen good demand for U.S. exports, but we will be competing with Canada for the world export market not to mention the Black Sea region that might be eager to export wheat amid increasing political tension. Continue to look for higher trade until we break the current uptrend.

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.