GOOD MORNING,
Prices were mixed to lower this morning, with the board continuing to follow the path of crude. As prices neared the close, crude jumped to new highs taking Ag prices along for the ride, as the correlation between macros and ags continues. If energies continue to rally, would expect to see more short-covering from the start of the day.
It has been a week of net fund selling across the board, and tonight we get the latest commitment-of-trader's report. Funds are an estimated net short 175K corn, futures / options combined. That position can give the market a boost on any day that delivers a bullish surprise, as was shown by crude's rally impact on those energy-related markets. Ethanol, corn, and oilshare were all beneficiaries of better crude oil prices. However, short-covering rallies are not good enough for prices to sustain strength, and funds are now hunting for good rallies to sell.
April 9 is the next USDA report. Into that report, estimates for the Brazilian and Argentine bean crops have been dialed down due to continued dryness. Corn demand may be cut by 300-400 mln bu due to lower ethanol and exports.
WEATHER
Midday model run wiped out precip from Mo. to Ohio, and down to Kentucky. A drier weather outlook is on tap for next week, and then wetter again after that. Eastern Midwest will see light rains followed by dry weather, which may allow some fieldwork. As far as the Delta, there was a small pullback in precip., but conditions still need to turn much drier to get planting underway full speed.
ANNOUNCEMENTS
Argentina's BA Exchange forecasts the 2019/20 bean crop conditions 33% G/E, vs. 34% week ago, with production lowered to 49.5 mmt, down 2.5 mmt from the prev. They put corn crop conditions at 32% G/E vs. 32% week ago.
Russian media reported the gov. has given approval for the 7 mmt export grain limit through the end of June 2020. Additional measure could be taken at a later date.
FC Stone forecasts 19/20 Brazil bean production at 120.1 mmt, down 3 mmt vs. their prev. forecasts. However, even 120.1 mmt would be a record, nearly 5 mmt more than last year. Exports were forecast at 71.0 mmt.
Arbitrigo, a Brazilian wheat milling industry group, said mills there are seeking wheat supplies outside of Argentina. The group said there are people pressuring the gov. to remove 10% import wheat tariff from locations from outside the Mercosur trade bloc, as well as wanting to remove sanitary restrictions from Russian wheat for a time period.
CALLS
Calls are as follows:
beans: 2 1/2-3 higher
meal: .30-.70 higher
soyoil: 20-25 higher
corn: 2 1/2-3 higher
wheat: 8-10 higher
OUTSIDE MARKETS
Outside markets show a continuing firm US dollar, trading up to 100.77, and higher crude at $27.00/barrel. Stocks are down 120 pts.
TECH TALK
- May corn still has the contract low in place at $3.32, but corn has a tendency to place highs or lows at the beginning of each month, which it appears to want to do again.
- July wheat prices correct down towards the lower end of trading range ideas which is closer to $5.29/$5.30. Prices are bouncing this morning, and would look for any move through $5.50 to find prices back in the previous $5.50-$5.70 congestion zone. The bounce back in wheat prices reinforces the current trading range from $5.30-$5.70.
- May beans post a new low for the move down at $8.55 3/4 but could be nearing low end ideas. Prices snap back easily, and if wanting to be short would not be a seller down here. In the big picture, May bean resistance is located at $8.70, and the chart needs to close above it to stabilize.
- May meal prices turned sideways from higher, and the crack of the $310.00 support level took prices to new lows this AM at $307.10. The 100 day moving average is now at $305.00, and prices could go there on more buy soyoil/sell meal trade. Would still want to price or cover a short if we go there.
- May soyoil prices with the morning high of 2662c right against trendline resistance. If short, need prices to turn lower, as any move over this line would take prices towards 2740c once again. If wanting to sell would prefer to wait for a break of double lows at 2582, which now appears to be a temporary bottom.
MAY CORN
Prices continue in a bear market with contract lows at $3.32 and operating in a down-trend channel. A series of market lows are now forming to counter-balance a stiff line of resistance. Yesterday's rally to $3.43 nearly hit the top of the down-trend channel, although prices are back below $3.40 today. Though the down-trend is strong with an ADX reading of 34, (anything over 25 shows strong trend), it could be time for a house-cleaning bounce, and yesterday's quick short-covering rally could have been a foreshadowing of that price action to come. Would probably price something at these current levels and wait to see if new contract lows can be posted. As mentioned before, corn tends to make its low or highs at the start of the month, and the chart is beginning to feel sold out at these lows. If the current prices hold, would look for a small $3.35-$3.55 trading range to form heading into April.
TAGS – Feed Grains, Soy & Oilseeds, Wheat, North America
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