THE OPEN
May beans: 16 lower
May meal: 5.40 lower
May soyoil: 58 lower
May corn: 6 lower
May wheat: 9 1/4 lower
Prices opened as expected with recovery trade particularly in soyoil from the open. Meal turned higher on oversold conditions as oilshare was lower. Wheat lost to corn, and beans to corn. Outside markets continued to apply pressure with the Dow sharply lower on liquidation. Deliveries were minimal with no beans, soyoil, and only 7 meal out of Incobrasa in Gilman which were stopped. Sharply lower canola and weaker crude weighs on the market.
SOY
- The soy complex traded lower today, with prices putting in some recovery trade initially with a short-covering bounce.
- May soyoil prices were sharply lower after canola gapped lower yesterday, eventually locking limit-down, with palm oil closing down 1.1%. The declining values in the Chinese meal market set the stage for a nice break-down in Chicago meal, as world markets tend to follow one another. However, the drop in meal was followed by a decent round of commercial pricing activity, as well as those booking profits on the run-up in oilshare. May crush trades up to 71c/bu while oilshare is still strong at 36.92%. Meal was the first market to turn mixed after the open.
- Beans now must digest more stable crop expectations from Brazil, with a return perhaps of better rains in Argentina over the weekend. The BA Exchange lowered its G/E rating down to 15% this week vs. 19% week ago on the hotter and drier conditions over the past two weeks. Other areas in Brazil remain too wet for harvest and continue to present a challenge. Brazil's ANEC forecast bean exports in the range from 5.0 to 6.08 mln mt. Spreads were mixed with July/Nov beans trading to 1.58c from 1.68c inverse, while May/July trades to 12 1/2c from 10 1/4c. July/Dec meal trends from $37.80 inverse up to $40.70. Brazil premiums were firmer on talk that China purchased 5-6 cargoes.
GRAINS
- Grains opened weaker but found some short-covering and pricing activity that helped to stabilize prices at the open.
- May corn finds early support bouncing off trendline at $5.40, while Dec. corn tests the key break-out level at $4.65. Both levels are important areas of support, so slipping underneath would trigger more fund liquidation.
- May wheat also tests key support, but for this market the important support is $6.50. Trade below that level would create more selling. Spreads remain on the defensive with July/Dec corn trading down to 60 3/4c from 66 1/2c as export activity remains quiet. Nearby spreads are firmer with May/July trading to 12 3/4c from 9 1/2c inverse. Basis levels remain firm, as farmer selling remains extremely light. July wheat/corn trades from 1.18c up to 1.21c.
- May corn could find potential resistance on rallies due to better priced corn out of Argentina into the April/May time period. South Korea was a noted buyer of US corn today.
AT MIDDAY THE MARKETS ARE AS FOLLOWS:
HI LO
May beans: 15 lower 13.95 1/2 13.78 1/4
May meal: 3.30 lower 425.10 415.30
May soyoil: 45 lower 49.71 48.60
May corn: 6 lower 5.48 3/4 5.40
May wheat: 11 lower 6.74 6.61 3/4
May canola: 13 lower 732.90 720.50
OUTSIDE MARKETS
Stocks are 17 lower at the start of the trading session but were down 300 pts at midday. Crude trades down to $61.74/barrel but is steady right now.
CLOSING COMMENTS
Seasonals tend to drop lower into Brazil harvest and the beginning of the US planting season. Given tight carry-out scenarios, it will be interesting to see if demand surfaces on the breaks this week. Open interest dropped indicating some funds took profits into the end of the month.
Focus may shift from old crop to new crop demand. Key value levels seem to be $4.50 in Dec. corn, though $4.65 marks the technical break-out to the upside. May corn ranges from $5.25 to $5.72, but 5.35 to $5.40 May corn could be closer to value. November beans should find value at $12.00 on a break of size, with May beans seeing the same from $13.70-$13.80. May meal appears to find a value level on a break towards $412.00 to $413.00 should we go there, though doubt at this point we will. May soyoil back and fills, but 48c is a significant support level in a market that does not appear to be over on the upside. May wheat remains the straddle/strangle market, following true to form this week from $6.50 to $6.85. Charts appear most constructive for May wheat, so cover breaks accordingly.
Look for the first of the month to perhaps bring back some stability. Major trends have not changed. Price, cover shorts, or try the long side until funds liquidate 2/3rds of their positions with bearish fundamentals to match. The commitment-of-traders report is out tonight, with funds estimated now to be long an estimated and advertised 380K corn, 175K beans, 60K meal, 30K wheat, and 115K soyoil. If charts turn bearish, there is plenty of downside potential. However, at this point, would not bet on it before the March WASDE report. While the markets pullback, they do not break enough yet to turn trends.
TAGS – Feed Grains, Soy & Oilseeds, Wheat, North America