Corn: Volume backed off a little Monday as trade prepares for the January crop report. Most traders will likely spend this week focusing on just where they want to be for the report rather than getting aggressive attempting a new market movement for corn.
Some sales were seen overnight after the recent move to fresh contract lows with those sales totaling 110,600 tonnes to Mexico. Weekly sales should see an increase on Thursday to also reflect the recent move to new lows. Trade is estimating that index fund re-balancing to start 2014 will mean that these index funds will be buying just over 90,000 contracts of corn. It is important to know that buying by index funds is much more spread out and long term than the typical trading funds we are used to seeing. If the index funds do buy this quantity of corn they will intend to hold the position for a long term position. They are also known for buying small to moderate amounts on the opening and closing spread over many days instead of seeing a sudden bounce in the market. This could provide support for corn going into the crop report on Friday. Corn bulls now have something they can get more excited about until this re-balancing is over. Bears still have the upcoming report to sell most of any bounces that occur this week.
The average trade estimate for corn carryout on Friday’s report is for 1.861 billion bushels of ending stocks compared to 1.792 in December. Average trade estimate for corn quarterly stocks is 10.790 billion bushels…Ryan Ettner
Soybeans: Soybeans started the first full week of trading for the year on a positive note. Volume was lower than normal as the bitter cold temps and storms over the weekend no doubt kept some traders out of their offices. Weekly soybean inspections came in at a bullish 56.4 million bushels which was way above of what we need to ship to meet the USDA export target.
As of last week, the United States has sold 1.493 billion bushels of beans but still had to ship out 633 million bushels so it was good to see exports shipments this strong during a holiday week. The cold weather was slowing the movement of grain Monday and that did limit the amount of hedging we saw.
Some in the trade were trying to spin South American weather as friendly but most of the South American crop is looking good. Most in the trade estimate that less than 10% of Brazil’s crop is under stress while less than 25% of Argentina’s is in need of rain. A rain event is forecast to move across Argentina Wednesday through Friday. If it falls as advertised, it should help replenish the drier portions of the country.
The USDA’s much anticipated January crop report will be released on Friday. The trade is looking for bean production to come in at 3.279 billion bushels with an average yield of 43.3 bushels and a harvested acreage of 75.749 million acres. Allendale projects the crop will come in at 3.251 billion bushels with an average yield of 43.0. The avenge trade guess for bean ending stocks is 149 million bushels, down 1 million from their December estimate. Allendale is looking for ending stocks to come in a little friendlier, falling to a 132 million bushels. The average guess for the quarterly stocks is 2.161 billion bushels. A year ago the Dec 1st stocks were 1.966 billion bushels. Allendale projects the quarterly stocks to come in at 2.171 billion bushels. This week’s trade will be dominated by positioning for the index fund re-balance that begins on Wednesday and USDA crop report on Friday…Jim McCormick.
Wheat: Wheat finished the day mixed as one of the largest wheat purchases in several years from Egypt helped to support markets on the potential for better global exports. We did open higher today in the March Chicago contract but did fall back and actually finished lower than where we opened which technically does not look good from a chart standpoint. Cold temps are moving out of the Midwest and plains over the next few days, which did cause some concern over winter kill but with the return towards more normal temps around the corner this may have been seen as a sell the fact trade today. Big picture, we still have large global supply of wheat and are still trending lower so we should look at selling rallies right now.