The grain markets are attempting to rally today after export sales were reported at 7:30am this morning.
Wheat 15/16 range 200,000-400,000; actual: 721,900 needing 279,500 each week
Corn 15/16 range 500,000-700,000; actual: 779,800 needing 742,300 each week
Soybean 15/16 range 700,000-1,100,000; actual: 1,797,600 needing 375,800 each week
SoyMeal 15/16 range 150,000-300,000; actual: 224,100 needing 122,600 each week
SoyOil 15/16 range 10,000-40,000; actual: 37,700 needing 9,300 each week
While these sales are positive for grains, we also are experiencing a sharply lower dollar, down 50 points at 99.23. This combination is the reason that I think we are rallying, however I still don’t believe this is a reason to rally alone. As long as we remain behind on export sales, higher grain prices will slow continue to makes sales difficult.
Corn I think will maintain a trading range between 360 and 375 for the near future. Contract lows are 7 cents away at 356. Being this close to support and the markets failure to push lower beyond 358’2. Call spreads for the Dec. 16 contract are trading at favorable prices during these low volatility periods. I don’t expect a lot of downside potential between now and planting season and I also don’t see a lot of upside potential between now and the Dec. 9 WASDE report. Mostly expecting sideways average trade.
Soybeans have several obstacles that need to be addressed. The first issue is the presidential run-off election this Sunday in Argentina. The opposition candidate, how is polling well, is expected to cut/greatly reduce the export tax that is currently in place. This has the potential to flood the market with fresh soybean sales from Argentina farmers. The next issue is the continuously improving weather in South America as the 10-day forecast shows average to above average temperatures and rainfall with slow soaking rains expected over the next five days. Planting progress in SA is nearing the end so they appear to be set for another ideal start to the growing season. I am expecting a range of 850 to 875. The soybean complex will quickly shift to a weather market as all eyes will be focused on South America. From there we will shift to U.S. planting intentions and then onto our weather. If both hemispheres turn out a good crop, then soybeans have a strong possibility of seeing a seven on the board, but we are a long ways away from having a finished crop. A lot of things can happen and at this point, aside from a perfect season, any news will likely be bullish.
Wheat showed a strong bullish friendly day yesterday. The October low of 483’2 failed to hold during the day session and appeared to be setting up for another leg lower to test the contract lows, however near the close of the session a rally in corn and wheat occurred. Wheat rallied all the way back to close at 483’2, right on that short term low. This gave some bullish buy signals for technical traders and this morning we had an announcement from the minister of Ag and Trade for Ukraine stating that they will be limiting this year’s wheat exports. Due to a weak currency in Ukraine, their grain has been a popular purchase and may be starting to stress their domestic needs and a restriction on export sales helps ensure they have enough for themselves. Originally, I believed wheat would join the corn and soybean trade near their respective contract lows and I still have a feeling that it will, but today and yesterday may be telling us something different.
I do believe our lows have been seen for the time being. We already have a handle on this year’s crop size and its big, we know sales and slow, we know South America has ideal weather, we know that the U.S. dollar is very strong in comparison to other exporting countries. I think we are already pricing in the assumptions of these bearish elements and leave surprises mostly open to the bulls.
The cattle market is continuing to be crazy volatile. Yesterday’s rally to resistance appear impressive but there is a lack of follow through buying so far today. In the January contract 165 is our target for making sales, we missed it in the night session but still plan to continue to target that price.
General recommendations, I would look to start bottom picking for anybody that is looking to play the long side of corn, soybeans I am waiting, and wheat I am waiting. Soybean concern is this weekend election, wheat concern is the likeliness of the Ukraine story being a short term reaction and a strong possibility of seeing improving crop conditions on Mondays crop progress report.