Corn: Old crop corn saw more violent liquidation on Monday. After Thursday’s limit down move, there was certainly more selling expected to spill over into this week.
A major reason for the leftover selling is that just about every type of trader was caught long going into Thursday’s report. Small speculators, funds and even spreaders were all long, which meant they all needed to liquidate. May corn almost finished limit down again. That would have been major news because it would have been the first time in history for corn to close limit down two days in a row since we have used expanded limits. Old crop/new crop spread traders sold off those spreads over 40 cents, which is the first time in history we have seen that spread move that much in one day.
This commentary has been talking about spreaders buying in this market for weeks now, and now those spreaders all want out at the same time. Due to this spread liquidation, the December was able to finish only 3 cents lower as spread liquidators were selling old and buying December actively. Looking forward, it is hard to say if the December is done selling as it was artificially supported by these spreaders.
Monday's weather update from NOAA was not only warmer but wetter than the forecast seen on Thursday. With the forecast being warmer, it would suggest that planting delay talk could subside but the wetter portion keeps us from thinking we will see an early planting year.
Look for at least one more day of leftover selling before old crop begins to show a technical correction. New crop could still see some pressure from the improved forecast for now. Large support would not be expected until 511 and then 500…Ryan Ettner
Soybeans: The bean market started the month on a negative note with follow-through selling from Thursday bearish report. The corn market took the brunt of the selling, but some spillover selling was definitely seen in the bean pit.
After digesting the report, we are a bit surprised by how much the trade missed the government’s number. The USDA found 999 million bushels in its survey. This was more than the trade’s 935 million bushel average guess. With the trade getting weekly updates of sales and shipments as well as monthly crush numbers, it should have a pretty good idea on demand. So the real question is how the trade missed the number by so much. We will get a better idea on how the USDA will adjust for these “found” bushels in the April WASDE report.
With the hard break we have seen, we would look for export business to pick up a bit. Every time old crop has been below the $14.00 level, we have seen China extend some coverage. The shipping delays that have pushed business to the U.S. shores over the past couple months are still there, so China might use this break to extend some short-term coverage. Monday’s export inspections came in at 16.300 million bushels which was down a bit from last week’s 18.45 million inspection number.
Funds sold an estimated 6,000 bean contracts Monday. They were estimated to be long 100,900 contracts coming into today. The trade will be looking for a turnaround Tuesday…Jim McCormick
Wheat: Wheat finished the day under pressure as we continued to see liquidation in the front-month corn futures that kept pressure on the wheat complex for the entire session.
Export inspections for wheat were 25.736 million bushels compared to 20.788 million bushels for the previous week. After this recent fall in prices, several countries that were willing to unload wheat at higher levels are probably going to face some issues. Countries we have been talking about such as India and Australia are now going to see more competition on the export markets from U.S. wheat. South Korea feed mills will buy around 450,000 tonnes of feed wheat for August-September delivery. There was also talk that they will purchase another 160,000 tonnes for July delivery.
Weather is going to be a key issue in the coming weeks as more of the wheat in the U.S. is coming out of dormancy. There has been talk that we could see ratings this week and if not this week then definitely next week. The expectations are for a 1%-2% drop from last fall’s 33% ending figure. Wheat ratings were released at 34% better than expected after recent rains helped alleviate some crop stresses…Cordon Sroka