Corn: There was a slight surprise in corn on Monday with some selling move across most of the agricultural markets. This left many people wondering if they were wrong to buy recent dips. It is hard to believe that is the case. Trade is still looking for the carryout in corn to drop from 745 million bushels down to 736. There is nothing in that expectation to suggest selling was needed.
Even after Friday’s strong close, these prices will be well supported if the report comes out as expected. Trade is not looking for a drastic drop in stocks. Some might even say the recent estimate is on the conservative side. Crude may once again have helped the pull on corn being down over $1.50 through the second half of corn trade.
Recently, we have seen the buyers allow further pullbacks before coming back in with good support. If this carryout number does come in at trade expectations, this corn market will have the support to carry it right into the acreage battle and planting concerns. With the recent rally occurring without a single export to China and with little support from funds, it is easier to expect a slow grind higher for now.
It is always important to keep hedges prepared for a disappointing number, as the USDA can surprise us. Even though we don’t expect Wednesday’s report to throw a bearish number at us, it is always better to be prepared, especially when protecting prices this high. Remember that a carryout number left alone would still be considered by trade to be disappointing…Ryan Ettner
Soybeans: Beans closed 20 cents off the highs after being victim to profit-taking. Traders are reducing their risk ahead of Wednesday’s USDA report. We are still expecting to see tighter stocks than last month.
The trade is trying to reduce their risk appetite on beans now that the timely rains should have changed the outlook in South America. Any reduction in Argentina’s crop could be made up with increases in Brazil’s crop. The floor used to look at this story as bullish and now the situation has changed.
This doesn’t mean we are going straight down from here. We will see pullbacks but corn and wheat still should take the beans higher in the short term. Soybeans can’t lose too many acres right now and will have to keep pace. Our upside objective has been met but still could see a run to 1475…Steve Georgy
Wheat: Wheat rallied Monday as world buyers were back in the markets trying to get product bought on the small pullback in prices the past few days.
On Friday it was announced that Egypt was looking for 55,000 tonnes of U.S. hard red wheat, 60,000 tonnes of U.S. hard red spring wheat, and 55,000 tonnes of U.S. North Pacific soft white wheat. They ended up purchasing 55,000 tonnes of U.S. soft red wheat, 55,000 tonnes of the Australian wheat and 55,000 tonnes of Argentine wheat. There still are ongoing port delays in Egypt but it does not look like Egypt will face a grain shortage. This was Egypt’s first wheat purchase in about a month.
In other export news, Iraq purchased a total of 300,000 tonnes of wheat on Monday. Australia received a bulk of the sale, but the U.S. did sell 50,000 tonnes of wheat to Iraq. Algeria is seeking 50,000 tonnes of option origin wheat for May or June delivery. Turkey is also in for up to 300,000 tonnes of milling wheat. Iran is also going to the world market to make up production shortfalls due to drought.
All this aggressive buying of wheat shows that the world buyers are still in their panic buying mode. Total export sales year to date are 28% higher than the five year average as expected by the USDA. The four-week average sales pace is 65% above the five-year average, which shows how aggressive the world buyers have been the past few weeks. On the weather front, there is snow in the forecast for the plains. This will bring much needed moisture to the crop and give it a nice insulating cover to protect it from more winter kill…Jim McCormick
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 a Sr. Broker at Allendale, Inc. Allendale is registered with the CFTC and NFA and is a member of the NIBA. www.allendale-inc.com.