by Duane Lowry
Monday, April 18, 2016
Corn rejected overnight weakness, establishing a 9-cent trading range for today’s session. However, this rejection wasn’t exactly all that impressive, with values trading into unchanged in the final minutes of trade, but settling up 2 1/2 cents. Recent strength is difficult to justify. Technical conditions suggest sustainability of current values is a legitimate concern. Fundamental profiles haven’t changed much in the past several months, with the exception that new-crop balance sheets will need to use a higher acreage calculation. Soil moisture profiles suggest that we will have a good start to the growing season. Weather forecasts offer no troublesome planting concerns. Producers have legitimate reasons to be reducing old-crop inventory and to be establishing some new-crop sales. HOWEVER, downside potential in the months ahead may not be of much significance below recent lows. And, with an entire growing season ahead of us, hedges established now may only be desirable for a period of time, not something to be held all the way to harvest.
Soybeans traded both sides in a wide-ranging and difficult to explain performance. Probes above recent highs failed in reversal-down fashion, settling down 1 3/4 cents. News is limited. Technical conditions warn that we can retrace a significant portion of recent gains. Bullish fundamental storylines are lacking. Producers have ample merit for aggressive price protection.
Wheat was today’s upside leader, finding new buying interest from inter-market spreaders. News is lacking. Global weather seems favorable/improving. I don’t want to be short this market, largely because of inter-market signals. If row-crops experience price weakness through the planting season to the extent I have described, wheat can remain in the overall trading ranges experienced during the past couple of months and maybe revisit the bottom side of that range. Wheat should be well supported on downside probes through inter-market activity, but it is difficult to see an independently trending higher pattern unfolding from current levels at this time.
In summary, it is difficult to grasp fundamental justification for believing prices will trend higher from current levels through the planting season. Technical conditions offer warnings that much of the recent price strength can erode during the next several weeks. To some extent, commodities were encouraged by crude oil’s ability to reject the scope of the initial negative tone from overnight. However, crude oil did close lower and still has significant technical signals that warn we may have $7-10 of downside erosion to experience in the weeks ahead. Ag markets remain vulnerable to a heavy price tone through the next several weeks, if the planting season offers limited weather-related concerns. Merit of near-term strength should be seen as questionable. At 1:15: Crude= down $0.67, Gold= unchanged, Dow Index= up 85 and the US Dollar= down 24, July Corn up 3 cents, May Soybeans down 1 3/4 cents and May Wheat up 13 3/4 cents.
WEATHER: Midday weather forecasts were largely unchanged from this morning’s discussion.
Monday night's grain trade outlook: I will expect weakness.
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.
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