Strong dollar, fundamentals, money flow move grains

Corn: After a tough start due to a good bounce in the dollar, corn was able to come back to finish well on Monday. The dollar made new recent highs again. This will continue to keep corn on the defensive. A dollar move higher does not mean we need to see selling, but looking ahead it will cause a drag on this market.

Let’s take a moment to look at both general supply and demand side factors. Most focus is obviously on the supply side. Fewer acres are expected combined with lower yields. Obviously that is bullish and most likely the cause for the mid day push higher. On the demand side cattle was limit down, crude is modestly lower, and the dollar was higher. We still look for total carryout to be lower but let’s not be too surprised if the USDA continues to throw some demand side curves at us.

Technically, both old and new crop broke out of their down trend lines last week and are both already meeting the next hurdle, which is to break to new contract highs. Both markets are close to making new contract highs but have stopped short the last few days.

Lastly, spreads are worth mentioning when the old/new crop spread narrowed in 10 cents Monday. This spread makes sense to be narrowing as upcoming new crop news is bullish while old crop is neutral to bearish. As with other trades, these spreads are being moved actively, so this narrowing could continue for days yet. As a whole, we are bullish and a breaking past contract highs would obviously give a much needed kick to these markets once again opening doors to a continued slow grind higher…Ryan Ettner

Soybeans: Soybeans traded both sides of unchanged but finished lower due to the strong dollar on Monday. Beans should follow corn and wheat over the next few weeks if we see strength but could lead the way down on breaks.

Fundamentals are negative and a bullish dollar could pressure beans back to the lower end of the range near 1300. Usually, you have two indicators that move markets, fundamentals and technicals. Money flow is now the best indicator to watch. Are the funds buying or selling? This new market mover is bringing lots of volatility and most likely will not stop for a while. We are coming to the end of the month and we typically see profit-taking from the funds.

Watch the dollar and crude for direction of money flow early in the sessions. Planting progress was friendly today at 41% planted. The five year average is 51% and last year we were at 51%. This may give us an early jump in the overnight sessions…Steve Georgy

Wheat: Wheat settled mixed Monday as a higher US dollar pressured the front month contracts. Continuing weather problems supported the deferred contracts.

The dollar rallied Monday on continued economic problems in the EU. Over the weekend, Italy’s ratings outlook was cut and Greece’s credit rating was downgraded by 3 points. This had traders selling the euro and buying dollars. The higher dollar makes the U.S. wheat less competitive on the world market hurting the demand for the wheat.

Deferred contracts were supported by cold wet weather in the Northern Plains. This has slowed the planting progress and emergence. As of Sunday, only 54% of the spring wheat crop was planted vs. the five year average of 89%. North Dakota is only 34% planted. Normally they have 85% finished. Montana is the other state far behind normal with only 49% planted. Hard red wheat continues to struggle with the drought gripping that part of the country. Only 32% of the winter wheat is rated good to excellent while 45% of the crop is rated poor to very poor. Kansas, the biggest wheat producer in the country, has 55% of its crop rated poor to very poor. Oklahoma’s crop is in even worse shape having 80% of its crop rated poor to very poor.

The other parts of the world that are struggling with dryness issues and giving bulls a reason to buy include China, Australia, the United Kingdom, Northern France, most of Germany, Northern Italy and parts of Scandinavia. Traders are also starting to focus on dryness issues that may be evolving in the Ukraine and parts of Russia…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.

About the Author

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 Senior Broker/Manager at Allendale, Inc. Allendale is registered with the CFTC and NFA and is a member of the NIBA. www.allendale-inc.com

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