Corn: Trade is focusing ahead to the upcoming stocks and acreage report. Heavy bean buying attempted to offer support across the complex Monday morning. We also saw that trade’s expectation for the acreage report is 94.72 million acres. We know that acreage number, combined with trendline yield, can project down to 440 December corn.
What few people can predict accurately is the stocks portion of Friday’s report. Right now trade is expecting a stocks number of 6.150 billion bushels (the amount of old crop still on hand as of March 1). What is important to point out is that this stocks report has led to some of the most violent market reactions of any other USDA report. During the last four reports, we have seen one cause a limit higher move while the other three were all limit down. That is four limit moves on the last four stocks reports. This makes the report on Friday potentially larger in market reaction than the January crop report, which was just as volatile as expected. Use caution and keep this in mind when making trades this week for either hedging or speculating.
Weather lately has seen a cool off, right back down to average highs but looks to warm back up to above average for most of the corn growing areas in the coming weeks. Planting is still given a thumbs up; acres have every reason to still be big so the stocks report is the only true unknown right now. Be cautious this week, speculators can still buy near May support, hedgers can still sell at December resistance but know what to expect on Friday…Ryan Ettner
Soybeans: You can’t keep a good bean down! Beans found strength again as we approach the USDA report at the end of the week.
This report will have two parts: planting intentions and quarterly stocks. The average guess for planting intentions is at 75.393 million acres. That is an increase of 393,000 acres. We are at the lower end of estimates, coming in at 74.495 million acres. With our acreage survey, we should see beans down close to 500,000 acres. If we see USDA release our number, that should be looked at as friendly.
For the quarterly stock report, USDA has generally agreed with the private trade in recent reports. Aside from plantings, the market has been well supported also due to potential future reductions in South America’s crop. South America is getting into harvest and we are expecting to see another decline from them. This could total up to 2-1/2 million metric tonnes off production due to dry weather.
The charts are still in an uptrend and the next target could be close to 1400 in the coming days. We still feel old crop is overvalued but the funds and the charts are still bullish. New crop has reasons to rally and stay supported. As we have mentioned before, the South American issue is a new crop problem. The market will be volatile this week but should find support until we see fundamental change…Steve Georgy
Next page: We look at wheat...
Wheat: The wheat markets chose to ignore a weaker corn market and instead followed a higher European wheat market to close higher for the session. Europe’s new crop wheat futures hit a nine-month high in European trading overnight. Western Europe has been experiencing a dry winter and that has traders concerned about the prospects for this year’s crop. This has the trade putting a weather premium into the market. The next few weeks, weather will have a big impact on the crop as it comes out of dormancy.
Additional strength from the market came from positioning for Friday’s acreage report. The trade is estimating all wheat acres to come in at 57.422 million acres. This would be down slightly from the USDA outlook forum number of 58.000 million acres. The number that is throwing the trade a curve is the spring wheat acreage number. The average trade estimate is 13.313 million acres. This is up from the USDA forum number of 12.000 million acres and up from last year’s 12.394 million acres. With the current new crop price of both corn and soybeans, it does not make sense that we will plant as many acres the trade is anticipating.
North Dakota State University released updated crop budgets which suggested corn could bring in $131 per acre, soybeans $135 per acre, and spring wheat only $39 per acre. When you look at these numbers, you have to wonder if we will lose acres of wheat to corn and soybeans, not add them compared to last year. This week’s trade looks to be dominated by positioning for Friday’s reports as well as closing the books on the first quarter of the trading year.
With the record supply of wheat in the world and a big U.S. crop on the way, the world is looking at plentiful supply of wheat. We would recommend hedgers to take advantage of rallies to hedge/sell inventory. For traders who want to own wheat, we would recommend using low risk options and not chase rallies…Jim McCormick