Corn: For most of the day on Monday, the corn market was quiet to slightly higher right up until the close. Looking back to last week, we see that funds exited 44,000 long corn contracts, which was likely end of month selling. Buying that was seen on the close certainly looks like smaller speculators buying before funds are expected to buy back in on Tuesday. Volume today was nearly half that seen on Friday which shows that this was smaller speculative buying. This buying will expect to find funds here Tuesday, so whether or not they are here will determine if these gains are held through the week.
Some traders are also looking ahead to the May 10 supply/demand report for a reduction in old crop stocks. Old crop bulls might want to tread cautiously before expecting a drop in those stocks. Last year, the April report left stocks alone, like this year and when May came around trade expected a delayed reduction. Instead, the May report last year showed a 55 million bushel increase.
While speculators have reason to buy, looking for fund reinvestment, they might want to be cautious staying bullish going into this supply/demand report. Starting Tuesday, we will see if funds come back buying again. After that, look for trade to start positioning where it wants to be going into the May 10 report…Ryan Ettner
Soybeans: The idea of “new month, new money” is all traders need to support these price levels in soybeans. New crop beans were the leader on Monday. Spreads were unwinding due to some surprise deliveries for beans on Friday. The November contract should continue higher to retest the 1400 level once again. It has been there several times in the past but has not managed to take it out.
Beans have a bullish new crop outlook and could get new buying interest ahead of the May USDA report. The May USDA report on May 10 will be the first look at new crop carryout and could show strong demand due to the record sales pace we currently are on.
Now that some producers are finishing up with corn they are starting to shift their focus to getting beans planted. Usually we are 6% planted as a nation, but as of Sunday night we were at 12% planted. This just means that we are ahead of pace. This does not mean that we are going to see big yield or that we usually beat trend line yields. Unlike corn, beans have no correlation between early planting and yield. We are still friendly new crop at these levels and should see a retest of the 1400 level…Steve Georgy
Next page: What's up with wheat?
Wheat: The wheat market closed the month on a positive note as a rally in the corn market and end-of-the-month fund buying propelled the market higher. New news to trade on Monday was limited so the market pretty much played follower. As the corn market rallied, it pulled the wheat higher. Wheat is being fed to livestock as a substitute to high price corn so when the corn rallies, wheat will rally to stay competitively priced.
Funds buyers were active as we closed the month out. They were estimated to have bought 4,000 contracts on the day. Volume was good as as we traded 5,700 July wheat contracts in the final minute of trading alone.
The trade will be watching results from this week’s Kansas wheat tour that starts on Tuesday. With all the moisture that has fallen in the plains recently we are expecting the tour to see a great crop. The current thought is the Kansas wheat crop should fall in the 400 to 457 million bushel range. This is a huge increase from last week’s 277 million crop. Monday’s crop ratings continue to be impressive as 64% of the crop is rated good to excellent, up 1 percentage point from last week. This is well above last year good to excellent rating of 34%.
The crop not only looks good is also off to a fast pace. As of Sunday, 54 % of the winter crop has headed out compared to 24% on average at this time of year. The spring wheat planting continues at its ferocious pace. We have 74% of the crop planted compared to the five-year average planting pace of 32%. Emergence of the spring crop is ahead of pace as well with 30% of the crop emerged compared to the five year average of 8% emerged for this time of year.
The commitment of traders report was viewed slightly friendly as the funds lessened their short position by 11,352 contras. This still leaves them short 44,198 contracts. Allendale continues to have a bearish view of the wheat market. The only concern we have with getting overly bearish is the massive short that the funds are carrying. If the funds decide to lighten up on this position, it would most likely cause the market to rally. We would recommend hedgers take advantage of rallies to price out some wheat…Jim McCormick