by Duane Lowry
Thursday, April 14, 2016
Corn traded on both sides of unchanged, finishing near the day’s high, up 1/2 cent. News is limited. US spring fieldwork is moving ahead favorably and forecasts are not alarming. US corn acreage doesn’t seem likely to change much from producer plans formulated during the past few/several months. Supplies are plentiful and the trade will expect that to remain the case until/unless a summer US or global (China) weather storyline develops. This creates vulnerability to price weakness during the next 30-60 days. Technical conditions can certainly build a case for a return to the lows made early this month. Dec corn is currently 21 cents off the April 1st low. July corn is 27 cents off the April 1st low. Producers have to respect the potential for a situation where prices experience a fundamental drag from a 2016 crop that is perceived to be off to a good start by June 15. While a weather market could certainly develop after that point, producers could be feeling a lot of pressure/anxiety as their crops appear to be off to a good start and their bin inventory is declining in value. Consequently, there is merit in producers considering some type of price protection strategy, or choosing to reduce old-crop inventory at the current prices. While current prices are nothing special, they are back towards the upper price parameters for the 2016 calendar year-to-date. A similar exercise could conclude the merit in some new-crop price protection strategy as well. I personally don’t believe there is much downside risk below recent lows, but I do believe that we can return to probe/test those lows. Hedges established now probably won’t be held till harvest, just to protect against near-term downside risk.
Soybeans gave back approximately 8 cents of yesterday’s gains. Producer selling was said to be very active in both old and new-crop positions. Short-term technical conditions could see prices hover up here for a bit, but overall technical and fundamental profiles warn that we should view at least 50 cents of the recent gains with quite a bit of skepticism. Producers can easily build a case for new-crop price protection stances.
Wheat recovered from early weakness to finish down 1 3/4 cents. News is limited. Traders expect beneficial moisture to reach US hrw wheat regions during the next few days. Inter-market spreads suggest that wheat will be well-supported against corn at current relationship values. All this suggests to me that any knee-jerk bearish reactions in wheat during the next few days due to weather should be seen as an opportunity to establish long wheat/short corn positions. Wheat could easily have another period of time where independent strength is exhibited for no apparent reason, such as what we experienced during the first half of March. Overall conditions suggest to me that we have achieved areas of value that offer minimal downside potential. Weakness during the next couple of weeks needs to be searched for longer-term ownership opportunities.
In summary, wheat will have little ability to build any downside momentum below recent lows. Corn and Soybeans have both fundamental and technical factors that warn us to be prepared for a weak price tone during the next 30-45 days, but closely monitoring weather for any new developments. What we have seen during the past several days should be a warning about what kind of upside power can be found when trader sentiment has been so universally bearish/depressed for so long. At 1:15: Crude= up $0.03, Gold= down $20.40, Dow Index= up 18 and the US Dollar= up 4, May Corn up 1/2 of a cent, May Soybeans down 7 3/4 cents and May Wheat down 1 3/4 cents.
WEATHER: Midday weather forecasts were largely unchanged from this morning’s discussion.
Thursday night's grain trade outlook: Expect a quiet trade, but likely well supported.
Humor/Quote of the Day:
The most important thing in life is to learn how to give out love, and to let it come in.
-- Morrie Schwartz.
Courage is the discovery that you may not win, and trying when you know you can lose.
-- Tom Krause.
This newsletter is prepared from information believed to be reliable. Early Market News, Inc. does not guarantee that such information is accurate or complete and it should not be relied upon as such. Opinions expressed are subject to change without notice.