Grains anticipate Friday's potentially volatile USDA report

Soybeans rally, while corn and wheat feel bullish

  
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

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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