Corn Fundamental Support: Almost all the activity in this market was done today between the 8:30 opening and 9:00 am. This market started off with active selling to start the day then traded very low volume and sideways. Trade spent the day expecting a 56% planting rate. There was a wide range of expectations with those in the north expecting 40% with those in the south looking for 70%. December gapped lower leaving a target of 497 1/4 for this market to rebound to if there is a technical bounce in the short term. Most importantly both July and December broke their long standing uptrend lines which looks bearish on the charts now (NYBOT:JCN14).
Old crop traders:
• Friday’s report should keep general support in old crop as long as Thursday’s report doesn’t disappoint again
• Watch the July/Dec spread to possibly add support once it pulls back to support around 5 cents
New crop traders:
• Trade was looking for a big jump to 56% planted today
• The current rain system clears out tomorrow with the next rain not expected for 10 days
• A chart gap was left at 497 1/4 which we should keep in mind on bounces
• A technical bounce is still needed making this market a short term buy
• Unless a quick move can put corn back above the old trend line, all buys will have to remain short term
• Buying in July can be risked to 497 1/2
• Breaking the long standing uptrend line now starts to make this market look weak longer term
• Look to sell bounces, summer weather is not a time frame to expect a straight down move
• Planting pace came in at 59% which was higher than trade expectations of 56 and even above the 5-year average
• (4/28) Sell December corn 520, risk to 530, objective 505
• (5/12) Bought December corn 495, risk to 485, objective 505
Soybean Fundamental Support: The soybean (NYBOT:JSN14) market bears came out of the weekend selling and took away pretty much all of Friday’s late session rally. New news to trade was limited and ramifications of Friday’s report continued to pull the market lower. Even though the old crop U.S. stocks continue to shrink there is more than enough beans in the world to get end-users to the United States harvest. Once the US harvest come in the US and world will have more beans on hand than we have seen in a long time. With a good SA production next year the USDA projects world stocks to jump to stocks to jump to an all-time high of 82.23 mmt. This would push the world stocks to use ration to 29.3% which is just shy of the all-time high.
Weather leans negative with 7 to 8 days of open for planting once the current system moves out. Planting progress reported after the close showed that 20% of the crop is planted. The five year planting pace is 23%. The planting progress was greater than expected.
As for USDA’s supply demand revisions Friday, Allendale agrees with the revision made to export numbers but we think some further adjustments will be made to the crush number down the line. The USDA raised the exports to 1,600 million bushels. We have sold 1,640 million bushels year to date so it looks like they are still underestimating sales by 45 million bushels. What you have to remember is the on average 45 million bushels of beans are sold in one crop year but area never delivered. They usually are rolled forward to the next marketing year. So if the “normal” amounts of beans are rolled forward this year the USDA 1,600 million bushel export figure should be correct.
The USDA’s crush number looks a little suspect in that is may still be to low even with a 10 million bushel revision higher. NOPA will be releasing updated crush numbers on Thursday. In April NOPA reported that they crushed 12% more beans in March than a year ago and we would look for the April crush to be strong on too. Early trade talk is that the crush should be 3 mb higher than last year.
Weekly export inspections came in at a friendly 239,955 tonnes up from last week 99,869 ton shipment. We look for bean market bulls to struggle to keep control of the market over the next few weeks and it would not be a surprise to see the market chop in the $14.50 to $15.00 range near term. Once the new crop is planted we would look for the market to sell off. If the USDA raises the bean acreage in the June report as anticipated we would look for ending stocks to top 400 million bushels. Without weather problems, this year our current downside target is $9.75 for November beans…Jim McCormick
• Buy July 1440 put at 16. objective 32 risk 8.
Wheat Fundamental Support: Wheat started the day sharply lower due to the sharp decline in the European markets. The situation in Ukraine has simmered down for now. Russian forces have become more tame and haven’t made any new advancements recently. The market was also reacting to the rain events over the weekend as any rain at this time is considered great and could improve conditions. Wheat inspections were out this morning and look better than last week. Last week we were looking for 565,514 tonnes and this week we are at 623,157 tonnes. The July contract held the uptrend and closed in the upper end to the range. We should still see good support on breaks as long as this trend holds. GTE ratings will be a supporting factor for now as well. Ratings are low and could remain that way for the next few weeks with the weather models keeping moisture away from the stressed region.
• Russia Stops Short of Recognizing East Ukraine Secession Vote
• Looming El Niño could push up commodity prices
• Price of Argentine basic food basket climbs 40 per cent in 12 months
• Lebanon tenders to buy 30,000 tonnes wheat
• Egypt’s local wheat purchases at more than 1.2 mln tonnes
• (5/2) Buy July KC 795, Risk 775, Objective 9.
• (4/29) Buy July Chicago wheat 678, Risk 658 , Objective 738.
• (5/09) Buy July Minneapolis wheat sell July Chicago wheat @ 55 Risk that to 40 with an objective of 110
Lean Hog Fundamental Support: The cash hog market continued its descent this morning with the Iowa/Minnesota run pushing to new lows for this downtrend. Futures have grown impatient in waiting for this drought in market ready numbers that has yet to materialize. Based on USDA’s current 2014 pork production forecast, of only a 1.8% decline vs. last year, they won’t come. It is the private industry which still suggests we are on the cusp of tightened numbers. The range of when those numbers will fall off ranges from June through August. For today’s cash hog trade prices were down $2. Cash pork on the other hand gained $2.
• (1/3) Sold 2 June 96.00 puts 1.95, risk to 1.97, objective 0. Closed 0.02.
• (1/24) Sold 1 June 98.00 put 2.02, risk to 2.10, objective 0. Closed 0.02.
• (4/21) Sold 2 June 120.00 puts 2.20, risk 3.25 filled 05/12 for -$840.