Bearish news overwhelms wheat, corn, soybeans

Weather, supply news pushing prices lower

Corn: Starting out, the week saw little fund trading that, in turn, meant a lower volume day. Funds have been one of the best supporters of corn lately. Monday there was a small morning bounce, but that did not seem to come from heavy fund trading. Instead that buying might have come from the dollar stepping back again from its recent strength. Corn has ignored the higher dollar trade over the last two weeks, which leaves trade skeptical how much support a setback will actually provide.

Many producers have been telling us that while the weather is warm, conditions are still quite dry. This morning saw a sudden change in the precipitation forecast with a large system coming out of the south providing 1-inch rains forecast for most of the corn-growing areas.

Old crop traders are getting the most help from funds but are also still seeing support from exports, which are running slightly above expectations. Weather continues to be the most general bearish influence on corn as it continues to suggest large acres with trendline yields. New crop corn is pricing in that neither of those two scenarios play out according to plan.

Current estimates suggest that if we do in fact see the 95 million acres, as our acreage survey suggests, combined with a 161.36 bu/acre trendline yield, there is potential to see 440 new crop corn futures. This is why the current 570 price already suggests that something goes wrong during the growing year…Ryan Ettner
Soybeans: Beans found weakness as funds sold 3,000 contracts on light volume. The May contract fell 7-1/2 cents. That was the strongest of the grains today.

Now that the port situation in Argentina has been straightened out, the truckers union started a strike today. It is harvest time and this isn’t a good time for this disruption. We feel most of this emotion could be added into the market already.

Export sales have been strong over the last few weeks and should still be a focus this week. Typically we really slow down in sales this time of the year, but they have been picking up. This is due to the concern for a smaller crop out of South America instead of port/trucking issues.

News was light Monday but keep an eye on the charts. May beans had an outside day down on the chart and could be enough to see more profit taking this week. A few things that could impact the beans will be April options expiring on Friday as well as the USDA report at the end of the month. We are expecting to see almost 1/2 million acres less on March 30. The dollar and energies haven’t impacted beans over the last several weeks and expect that to last through the month…Steve Georgy
Wheat:  The wheat bears came out selling Monday as bearish news overwhelmed the market. There were two decidedly negative stories that affected today’s trade. The first was a news story out of Russia.

Deputy Prime Minister Viktor Zubkov had made statements that Russia will not place any restrictions on grain exports due to the countries inventories being more than enough to meet domestic needs. There had been speculation in the trade that Russia might put up trade restrictions to slow exports in attempt to build domestic stocks. Russia is the third largest exporter in the world, making it a major competitor of the U.S. for market share. Monday’s export inspections did little to alleviate the trades export concern as inspections were only 21.0 million bushels, down from last week’s 31.7 million bushels.

The second bearish story that affected the market was the weather. Over the next five days a majority of the wheat country will receive rain. This is just what the winter wheat needs as it comes out of dormancy. It will also put much-needed moisture into the ground for the spring wheat crop that will be planted over the coming months. A good U.S. spring weather season will likely lead to good yields and put additional bushels on an already over-supplied world market.

With the record supply of wheat in the world and a growing U.S. ending stock number, we would recommend hedgers to take advantage of rallies to hedge/sell. Allendale just missed selling wheat on this last bounce; we will continue to recommend selling rallies. For traders who want to own wheat we would recommend using low-risk options and not chase rallies…Jim McCormick

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.

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