Corn: Another bullish weather market was traded Monday with help from the funds as well. In the past few positive trading days, the old crop corn has been left behind due to spreading. When funds buy, however, they keep their trading in the contract that has the highest volume, and that makes July the most attractive month for their buying. As of Monday’s close, the July/December spread had narrowed into 83 1/2. Support is now seen until 72 1/4. That shows us this spread can continue to narrow whether it is from one active spreading day or a continued lag behind this December contract. This reinforces the idea that December will still be the leader through the rest of the spring weather-driven timeframe.
On the weather note, there is still a call for wet and cool conditions in almost all areas that want to be planting this week. Next week also includes some increases in precipitation chances as well. Monday’s noon update, which increased rain amounts for next week, helped to add a secondary push as well as a strong move into the close. There are some areas in the south that may find a few days of planting but as a whole, not much activity is expected for the next 10 days.
Because spring weather can change very quickly, we will need to watch each forecast as we have been doing. All that is needed is one reduction in rain to see a setback. If that reduction is confirmed, then talk will quickly turn to setting a new one-week progress record above last year’s 29%. This gives us plenty of reason to stay bullish for now, just watch the weather closely…Ryan Ettner
Soybeans: Beans finished more than 12 cents higher and closed more than 20 cents off their lows Monday. Weather was the biggest factor in today’s trade. Beans rallied on the idea that wheat conditions are going to get worse due to lack of rain in the winter wheat areas. Traders were also buying beans today with the idea that corn isn’t going to get planted due to the rain outlook over the next seven to 10 days. Monday was an example of how beans could remain a follower over the next few weeks. If corn and wheat stay strong, we should continue to look for strength in the beans. Funds bought 4,000 contracts of beans, 1,000 contracts of meal and 2,000 contracts of oil. We expect to see beans stay in a range and could see more strength to get to the upper end of resistance…Steve Georgy
Wheat: Wheat weather bulls came back in force Monday. Traders went home on Friday looking for some much needed moisture to hit some of the driest regions of the wheat belt. The rains that fell were viewed as disappointing, and that brought the buyers into the market Monday. Currently, there is very little rain in the forecast for the southern plains.
Funds were an estimated buyer of 5,000 contracts. Wheat in the plains is reaching a critical level of, “get rain now or it will have to be abandoned.” Dry weather is also starting to become a concern in parts of Europe and China as their crops are moving out of dormancy and they begin their spring wheat plantings. Too much moisture is the problem for the Northern Plains and Canada. A Reuters news story out of Canada quoted a Canadian Wheat Board official saying that their wheat crop is expected to be planted 10 days to three weeks behind schedule, and this could affect this year's yield and quality. This news added to the bullish tone.
Monday’s crop ratings will also be considered bullish as 38% of the crop is rated poor to very poor. This is actually 2% higher than the amount of crop that is rated good to excellent. Last year at this time, 67% of the crop was rated good to excellent. The wheat continued to build back its premium to the corn today as the May Chicago wheat is trading as a 23 1/4 cent premium to the May corn. Wheat traded at a discount to corn for the first time in 15 years last week. Wheat trading at or near the value of corn is expected to increase the demand for wheat in animal feed. This should be considered friendly for wheat prices…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.