Corn: Large-scale fund selling was the order of the day on Tuesday. Fundamental news to start the day was bullish with South Korea talking about securing 12% of its yearly grain usage needs. There are a number of countries that want to buy now to hedge against a longer-term rise in food prices. That is likely the reason for the initial bounce overnight.
Overnight eventually traded lower, which was likely caused by risk aversion. That makes good sense when you look at it. Smaller speculators have been buying this market on each setback for nearly two months now. Needless to say, this is a plan that has worked well.
Last week, these bullish speculators saw fund selling hand them a sizable setback. After buying it back Thursday, they were once again finding themselves far behind by the end of Friday’s trade. Some of these long speculators had to see a higher opening overnight as a chance to get out and avoid the additional volatility that was seen last week. It does not take large selling to move the overnight market down 10 cents compared to day trade volume.
Once the day session started, funds began aggressive selling once again. This time there were fewer buyers to offer support after getting hit hard last week. For the first time in quite a while, front-month May corn has a chart that is on the verge of looking weak. Fundamentals look mixed with large potential exports partially being offset by a large expected number of corn acres this year. Trade estimates that corn acreage will reach 91.5 million acres now.
Seasonally, the corn finds a hard time setting back as planting draws closer but let’s first focus on how much the funds sell short term. It is impossible to tell if Tuesday was the last day of selling for the funds or if it’s just the beginning…Ryan Ettner
Soybeans: Beans closed limit down Tuesday as investors liquidated positions due to the political turmoil in Libya. We are at the lowest prices we have seen since Dec. 20, 2010. Funds were sellers of almost 10,000 contract and the market finished 70 cents lower. The market is expecting to open the overnight trade at 1309 – 1311 after Tuesday's decline.
The USDA says weekly export inspections of soybeans are 41.0 million bushels, topping forecasts for 30.0 – 35.0 million. Showers in Brazil are favorable for filling crops but are also slowing early harvest. Warmer and drier weather later in the week should help harvest progress. Showers and cooler temperatures in Argentina are seen as helping crops and keeping pressure on the markets.
Funds were sellers of an estimated 4,000 soybean meal contracts and 6,000 bean oil contracts…Steve Georgy
Wheat: The wheat markets crashed Tuesday with the March Chicago closing limit down 60 cents and the KC closing 57 lower. The meltdown happened after the market opened higher last night after the three-day weekend. The higher open was due the oil market and metal markets that were trading sharply higher. This lent support to the entire grain complex. Then as the night trade ran its course, the markets turned lower. Then the selling accelerated during the day session until the wheat hit limit down. The selling seemed to stem from investors bailing out of long positions in attempts to reduce risk.
After the revolt against Libya’s leader Muammar Gaddafi turned violent when government forces attacked protestors, investors looked to be dumping equities and grains positions and were buying metals and energies. The trade is estimating that the funds sold between 10,000 and 15,000 contracts Tuesday.
With the reversal in the market, the charts looked negative and that just added to the selling pressure. The March Chicago traded below the 100-day moving average for the first time since Dec. 1.
Additional pressure came from fears that the USDA will show big planted wheat acres in the USDA Outlook forum Thursday and Friday. On the export front, weekly inspections came in at 31.0 million bushels. This was higher than the estimate of 23.0 to 26.0 million. Egypt’s GASC is seeking 55,000 tonnes of U.S. soft wheat, 60,000 tonnes of soft or milling wheat and 60,000 tonnes of hard wheat.
On the weather front, China did receive some much needed precipitation over the weekend which will help reduce some of the drought stress they are currently having. More rain will be needed as the crop comes out of the dormancy. The hard red wheat belt in the U.S. continues to miss much needed precipitation while the spring wheat areas of the country continues to get heavy snow which could cause delays to the spring wheat planting…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.