Corn, soybeans, wheat sent lower by weather, supplies

Demand also appears to be slipping

Corn, crop, grain Corn, crop, grain

Corn: Rainfall was seen as beneficial in the corn market on Monday. Coverage and amounts were more than impressive from the weekend rain event that moved through. No system is 100% good coverage, but looking at a map of totals certainly suggests major help for some of the driest areas. This rain will cause some planters to begin moving that were waiting for moisture before getting started.

Looking ahead in the forecast, we see that after this week, conditions dry out while temps move to back above average. That type of forecast suggests that while these rains may have slowed planters, they will get right back out there going with even better soil conditions soon. We will start seeing planting progress numbers on Tuesday as a small fire at the USDA delayed the release of that report.

Most of trade feels that when it does come out it will still show a record national pace of 17%. When it comes to the technical side of this corn there is still downside room available before taking out important support. For the July corn key support stands at 602 1/2. For the December corn, key support lies at 523. New crop hedgers might need to lower top side selling expectations back down into the mid 540’s.

Corn bulls would get the greatest quick support from a morning export announcement, otherwise thanks to a good forecast the bears in the new crop continue to hold control of this market…Ryan Ettner
      
Soybeans: Beans were hit the hardest Monday with the May contract falling more than 16 cents. Old crop beans still held last week’s lows and could rebound from these levels. You need to be aware that the previous week lows have not been taken out since January of this year. That is 11 weeks ago. The 1415 area will be important in May.

The July chart is a little different but good support will come in at 1416. Demand has been a strong reason for the strength we have seen. As of Monday, beans are still almost 20 cents cheaper here in the US than in Brazil (port price + shipping to China). Brazil is now 88% complete with harvest and usually we lose sales at this point. Last year Brazil was 43 cents cheaper than the US at this time. As long as we still have the price advantage, beans will probably find support at lower levels.

We feel old crop beans are still overpriced in the big picture. For the short term, the trade is still inching demand higher. Our chart is showing that USDA is usually split on increasing or decreasing acres from the March report. Here are a few things to consider. With early planting in corn you will have to think beans will be early as well. If we see a record pace for corn beans could be at a record pace as well. This may entice the Southern regions to increase their double crop beans.

The other thing is that we are at a higher price than we were at the end of March. This could shift some acres away from corn and have more beans going in the ground. Balance sheets look pretty good for beans now that they have bought acres and sitting at a 2.56:1 ratio with corn. We are looking for a turnaround Tuesday tomorrow but be careful if those support areas are taken out…Steve Georgy

Wheat: The wheat market started the week off where we left off last week, selling off and settling near the daily lows. The May Chicago wheat contract hit its lowest level since the March 30 acreage report. The pressure to the market came from a two pronged attack of economic jitters and bearish weather.

Last week China’s released their first quarter GDP which came in a disappointing 8.1% Traders fear a weak China GDP number is a signal that their economy might be in for a “hard” landing. This would have a negative impact on the demand for all commodities. This thought processes had traders reducing risk today. Additional economic pressure came out of Spain Monday. Their borrowing costs were spiking today igniting fears that they will need a financial bailout like Greece received. This news added to Monday's risk-off mentality.

Weather-wise the U.S. Plains received beneficial rains over the weekend. Kansas and Oklahoma received up to two inches of rain. The Northern Plains, where the spring wheat is being planted, also received some much needed rain and they have more in the forecast. Producers in this part of the country were reporting that they were planting in some pretty dry soil conditions so this was a much needed rain event.

Wheat inspections, normally out after 10 am, were delayed due to a small fire at USDA’s Washington headquarters. They came in at 25.745 million bushels. This was up from last week’s 17.711 million bushel number. It was also above the trade estimated range of 15 to 19 million bushels. The weekly crop ratings were delayed due to the fire and will be released on Tuesday after the close.

The CFTC report released Friday showed that large speculator added to the short position which was also viewed bearish by the trade. They are carrying their largest short positions since Feb. 28. With what looks like a bumper crop on the way, and plentiful supplies on hand here and in the world, we believe that the path of least resistance will be lower for the wheat market. With this in mind Allendale continues to recommend hedgers 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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