Corn: The key planting progress dates for corn are May 2 through May 23. We normally go from 20% to 80% planted in that timeframe. Traders will soon be looking at the soil moisture maps and the wet conditions in the Red River valley and western Illinois Mississippi valley. Ideal spring weather must occur in order to avoid a planting concern issue. Current prices have moved towards previous lows and so far, major support is holding. The sell off has been largely due to ethanol prices that have recently tanked. The good news is that ethanol prices are now down to a historically low ratio to gasoline (70%). Thus we should see the ethanol hold soon. Also, there is a lot of poor quality grain that needs to move out of the bin. The size of this issue is an unknown but talked about everywhere we travel. We think that a lot has already been shipped. These two factors will be the negative catalyst for putting in a bottom. Thus, short term, we still see this market trying to test support in order to “find” a place where we run out of sellers and put in a low. Then we expect the focus to turn towards planting concerns. We are willing to buy just below support so that we are buying into stop loss selling. If there is no follow-thru, we will have a great low risk position. We know that it might take a few tries to get long before it works. Thus we will try to keep our risk limited until a low is in place.
Soybeans: After the USDA pulled the switch in bean sales last week, the market has not been able to recover. This market has now approached support levels seen following the January sell off. It is at this point that it will take more than outside markets to keep this market grinding lower. While crude and the dollar trade may be able to pull beans lower on a slow news day, it is unlikely that those markets will cause a break below recent support which is $9.11 for the May and $9.00 for November. With the South American crop getting harvested at a good pace, it is unlikely soybeans will see much of a rally.
Another issue is that even though the pace is good, yield numbers have not been providing much information. We are just not hearing enough from yields. There is some talk that they have been coming in slightly disappointing but for the most part, we are just not hearing much at all. What this comes down to is that we see reason for beans to move sideways short term, just as corn has been doing lately. For now, we have to keep waiting for information to provide us direction. With some of the snow pack melting over the last week with continued warm weather expected to move in, some thoughts are that field work needed to plant corn just might get done. Perhaps planting intentions will change greatly in the last few weeks leading up to actually putting the crop in the ground. What happens if conditions do work out well and areas finish tillage left undone last fall? It seemed all winter to be a feat that was too large to accomplish but now that the sun is out, opinions seem to change. It would be no surprise to see ideas of acreage change last minute which has potential to add support to beans should the corn get in on time. It is a tall order to get all the spring field work done but with normal spring weather, I would side with the idea the producer will get it done and more corn will be plante. Ryan Ettner
Wheat: With the weaker crude oil, it is amazing corn and wheat did not sell off more. Spreading between the soybeans vs the corn and wheat was evident. Our five- and 10-year seasonals suggest a rally for CBOT wheat typically in the making now through April. The last time projected U.S. ending stocks were above 1 billion bushels was 1987 and present ending stocks-to-use is 50.4%. That is just killer when it comes to seasonals. Do not look to the dollar for a correlation between the two. You have to venture back to early October to find a comparison to the recent low. Timing suggests new crop MGEX may have found a bottom with the recent high resistance near $5.47. Joe Victor
Bill Biedermann is Sr. Vice President at Allendale. Ryan Ettner is a registered commodities broker and grains analyst at Allendale, Inc. Joe Victor is Vice President at Allendale. Allendale is registered with the CFTC and NFA and is a member of the NIBA. www.allendale-inc.com