The Grains Review For the Week of March 5, 2012

#1
Grains Review for The Week of September 12, 2011

The Grains Review
For the week of September 12, 2011​

By Pitguru.com​

Coming back from the weekend the trade ground lower overnight in anticipation of a bearish report. The trade on Friday was anticipatory in many ways with positions taken off locking in profits or losses eliminating risk on both sides. In corn traders saw heavy front end option activity (CV) with this bought to cover flat price positions or to speculate with established risk. The market was eagerly awaiting the USDA numbers with many eyes on Europe over the weekend with a rumored Greek default in the works. This did not occur but Asian and EU equities are on the defensive adding to the bearish world undertone starting the week. Energies are on the defensive due to consumptive worries and confirmation that Shell found a major reserve of crude oil they expect to tap within the next 6 months.

Heading into the day session traders have WASDE to digest with corn yield estimated at 148.1 versus the average guess just larger than 149 bpa. Bean yield is estimated at 41.8 versus the average guess of just larger than 41 bpa. Remember that these guesses are gatherings of actual yield expectations, not what they think the USDA will put out on this report. The actual trade guess is much closer to a 146 at this point but no one felt the USDA would be this aggressive. The initial reaction is bullish for corn with the OTC market trading 745 basis Dec but fading as I write. I cannot see that in the numbers especially if you look at the world stocks numbers. New crop world stocks came in at 117.39 MMT which is 5 MMT larger than the average guess and 2.3 million above the largest prereport estimate. Corn ending stocks were lower but were 40 million above the average guess so I cannot see the real bullish impact for the trade at current levels. If it were trading at $6.50, yes, this would be bullish but trading at $7.35 I cannot see a bullish lean on this report. If the USDA had lowered harvested acreage in either beans or corn I could agree with bulls but this will have to wait until October at the earliest. If the USDA had lowered world ending stocks for any commodity I would agree with bulls. The corn yield drop is not enough for bulls with the drop in consumption easily offsetting the reduction. The reduction of 100 million in exports and feed for corn was expected by the trade with heavily bullish proponents exclaiming that the USDA reduced demand too much. Talking to my customers, the placements of chickens are falling and cattle are being sold early and often. This does not jive. Wheat saw no impact outside of new crop ending stocks rising due to a drop in exports. Feed stayed the same and corn collapsed by 200 million offering evidence that cattle on feed and chicken placements are dropping as feed costs rise. This is the demand destruction I have discussed recently and I look for more in the coming months if we do not see a drop in both basis and flat price corn. The overall impact of the report is mixed to bearish. Beans are bearish, wheat is neutral to bearish while some want to talk corn bullish. I do not see it from the report but help from the USD and cotton may be enough to help corn stay positive.

Outside of the report this morning traders have many macro factors to deal with. The Euro was 1% lower overnight only to rally 1.5% now trading around 100 higher versus the USD. This is a bullish impact for all commodities today with energies not using the momentum. Crude is lower which is dragging cotton lower after early bull spread momentum fades. There is a genuine squeeze going on in cotton right now with the production in Parana falling dramatically short of expectations catching many over hedged. Just think of what is happening during the MUW delivery period and apply it to this scenario.

The overall feeling nowmany minutes after I started this wire is more bearish. Outsides may help stem the bleeding but the Euro debt situation, weakening softs, neutral to bearish USDA numbers, overbought technicals and way too much weak length all point to a weaker trade today and through this week as the US harvest rolls along. I feel this is simply a breather in the agricultural markets, especially row crops. Markets still have plenty of upside potential after things correct. I would look to use this opportunity on the drop to expand coverage in corn before volatility jumps making it unattractive. Bean volatility is way too cheap in my eyes with early talk of La Nina in Brazil and Argentina offering chaotic opportunity for the next many months. Look lower right now but do not take the bull horns off, just sit around and wait for the next leg higher.

Disclaimer: Past performance is not indicative of future results. Trading futures and options involves substantial risk of loss and is not suitable for all investors. Fundamental factors, seasonal and weather trends, daily news, and other current events may have already been factored into the markets. The use of stop loss or contingent orders may not protect profits and may not limit losses to the amount intended. Certain market conditions make it difficult or impossible to execute such orders.
 
#2
Grains Review This Week : September 19, 2011

The Grains Review
For the week of September 19, 2011​

By Pitguru.com​

Friday saw messy pressure on the market with harvest going into high gear for corn and beans. This was reflected with pressure under the 100-day MA in beans and under the psychological support in corn at $7.00. There was little in the way of fresh information following Thursdays FSA numbers that were argued both bullish and bearish though out the day. The fact is technicals are still in charge which offers even more downside for the trade coming back this week. This was obvious on the overnight session. There was talk of Argentinean dryness but this is still early with major corn planting in Cordoba underway but still has time before switches need occur. Corn planting is currently estimated at only 4.3%. Wheat was a mess with rains expected to hit HRW regions which pulled KC to new range lows versus CHI. This is liquidation and hopeful hedging by producers looking at the recent rains as enough. I still fade this but cannot step in front of a train so beware of you are like me and remain bullish KWH-WH. The CN12-CZ12 spread ended just over 90-cents showing a 17-cent decline on the week. This is just a start with many, myself included feeling this spread should be trading at or near even if not a solid carry. We have plenty of corn using current demand figures so if the USDA is right about demand destruction this will likely be a major mover in weeks and months to come. With the front end spreads showing a carry, I cannot justify any major inverse so I would look at this as a bear spread opportunity.

The weekend saw rains hit the central part of the US stalling harvest but it remains early and the forecast shows below average precipitation and above average temperatures so any threat is minimal at best. The bigger issue and reason for the overnight weakness was the Euro with pressure building concerning Greek debt defaults. World grain values took a hit as Russian values tumble looking for some export interest. Current values at $270 per tonne show a $20/tonne decline week on week. This is in spite of growing interest from the feed sector in Western Europe as Barley and corn are replaced. This was spurred by Strategie Grains stating EU wheat consumption will increase by 4.6 MMT over the next year.

The overnight session started off on the defensive and it remained so through the close after a choppy session. Corn, Beans and Wheat all lost in step with nothing really seen in intra or inter market spreads. Bean oil lost to meal as world contraction looks to impede consumption. The one glimmer of hope is talk coming from China that they are looking to buy world corn following the price break in US markets. Nothing more specific than talk but with prices up 5% on the week in China there is evidence that they have a distinct need. Looking at beans, the American Soybean association stated they expect Chinese imports to increase by 5% next yearnothing like talking your position.

Heading into the day session markets have pressure from macros, weather turning bearish for harvest while bullish for HRW planting, bullish weather for Argentinean corn planting and concerns over world contraction. The impact on the trade this week should be negative as basis suffers from hedge pressure, weak longs run for the hills and funds add to shorts in wheat. Technically traders have no support with all markets reaching for bottoms without any signal that one has been reached. Bulls need to be cautious with more and more discussion concerning world economic woes. This will put everyone on their heels for the immediate future allowing for a further pullback in price, but this will not last too much longer with US stocks too low for this to fall out of bed from current levels.
 
#3
Grain Review for This Week : September 26, 2011

The Grains Review
For the week of September 26, 2011​

By Matthew Pierce​


Friday saw another downside leg in beans with further pressure from South American hedging and weak longs exiting. Wheat was the strength all session and Corn looked at both side of unchanged but with crude untrustworthy above $80.00 this ran into more pressure late in the session. A settle under the 200-day points to more pressure but as I wrote on Friday, I feel the pressure in corn is limited at current levels due to growing demand and Mexican production problems. This does not take into account an expected drop in harvested acreage next Friday with Informa looking for a 400K reduction in corn acreage while bean acreage was pegged at 50K higher than last month. Overall it was a messy session with heavy option volume see in again in corn and wheat. The trade remains leery of a further downside move but is willing to scale in buy corn call spreads at cheap levels establishing their risk looking for a rebound with 59 DTE as of today.

The weekend saw minimal information out of Europe concerning either a solution or a default from Greece. The agricultural overnight was wide ranging with high volume after a quietly higher start. Corn traded both sides of unchanged falling to $6.30 before rebounding and closing in the upper ends of a 16-cents range. Beans were dramatically lower at the bottom end of a 39-cent range before rebounding back to the middle but losing to corn. Wheat tracked corn in a 25-cent range closing near the highs. Both KC and Minny showed strength over CHI with the bull spread scenario in Minneapolis starting to show teeth. This traded back out to 20-cents overnight. Look for more as producers hold tight to their stocks.

Heading into the final week of September ahead of the USDA report there is little for bulls to get excited about early. The USD is flat against the Euro with many waiting for answers. Crude is trading either side of $80.00 offering nothing fresh to the macro side of the market. Fundamentally traders are looking at inspections today with corn expected to be hefty. After that we have to wait for crop progress this afternoon with all eyes on the NW production states. A further decline in conditions with maturity still a week away will have an impact on yields. Then markets wait for the USDA to set acreage and stocks on hand. This comes out on Friday with the trade looking for a mild increase in planted acreage with harvested acreage the contentious point. I expect a small decline while others are looking for it to gain in step with planted. As for stocks, old crop will be a focus after the hefty export sales roll over numbers seen a few weeks ago. With higher old crop stocks, the USDA gives themselves an out to lower production on the Oct report without lowering new crop ending stocks. I highly doubt they find the recently lost demand so look for ending stocks to climb on the Oct report.

Overall the week will be violent with fund liquidation an issue moving into the end of the month. With quarter end ahead of us and an ugly quarter at that, there is a serious possibility of another leg lower before markets have legitimate rally potential. The fundamental side of the market is a sleeping bull and should stay that way to start this week. I higher doubt anyones going to want to go into the Stocks report short so look for coverage on both sides of the market offering a very choppy future for agriculture.


***Chart courtesy Gecko Softwares Track n Trade Pro
Past performance is not necessarily indicative of future results.

Disclaimer: Past performance is not indicative of future results. Trading futures and options involves substantial risk of loss and is not suitable for all investors. Fundamental factors, seasonal and weather trends, daily news, and other current events may have already been factored into the markets. The use of stop loss or contingent orders may not protect profits and may not limit losses to the amount intended. Certain market conditions make it difficult or impossible to execute such orders.
 
#4
Grains Review for The Week of October 10, 2011

The Grains Review
For the week of October 10, 2011​

By Matthew Pierce


Coming back on this Columbus Day holiday the market is set up a little differently. The stocks report was obviously bearish across the board. Month end activity added to pressure as traders took corn limit lower testing the 40-cent barrier for the first time. The market then consolidated right at this level before bouncing slowly last week and into the overnight which extended gains for corn comfortably above the $6.00 level. This is the exact pattern I saw on the daily chart following the previous 4 quarter ends. If the trend holds, and I think it should, this could be in for a sizable rally this month and over the winter. The upside is limited as compared to earlier this summer but a rally back to $7.00 is easily achievable in my view. Beans collapsed following the report but unlike corn it has less incentive to rally from current levels. I talked to people far smarter than myself over the weekend and today and they all agree that the bean corn spread is in for a hell of a ride. This could rewrite the record books in favor of corn with the size of bean stocks a bearish factor heading into the WASDE report this Wednesday. Chinese demand has been happily met by South American origination with Argentina and China in bed again over the weekend. A phyto sanitary agreement for corn exports was reached with China which means more demand will shift for the expected blow up in corn interest from China. This gives the USDA a possible out on this report for corn stocks. Corn demand is coming back with a vengeance after the $1.60 price break so the USDA should add back a large chunk of the 400 million they took off just last month. If they add back any exports they have a balance sheet issue in corn while beans appear more bearish from even current levels. Rains in S. America were solid over the weekend but less than some were expecting. This is a bigger issue for the expected corn acreage expansion than beans at this point so even if it is bullish for beans today, it shouldnt help in the long run. Wheat consolidated based on strength in Minneapolis as their MWZ-MWH spread has exploded again helped by demand from Pacific Rim meeting a lack of sellers. Producers are sitting on stocks after the recent harvest because they are smart enough to realize they are in control. Protein wheat is a high demand product and they have it all. The MWZ-WZ spread reached $3.00 late last week with the MWH-WH sitting around $1.90.


If Greece can pay its bills and Germany holds tight, the Euro will rebound against the USD into the end of the year offering a positive bias for commodities. Demand from China is another factor here so watch what they are taking as well as where they are getting it. Wheat will be under pressure as Australia enters the export market following another solid early production period adding to feed wheat woes. Ukraine eliminated their export tax over the weekend meaning more pressure on wheat versus corn so this is another spread that may rewrite the record books. I know wheat appears attractive versus corn but it is a dog.


The fundamental side will be better defined on Wednesday morning with a fresh WASDE report. Changes are expected all over the place. Corn yield, production, stocks, acreage and consumption will all adjust. Beans stocks should increase adding pressure to the fund long. World wheat stocks should increase adding pressure to CHI wheat with the current 42K short still holding potential to add.


The macro side needs to see how the Volcker bill comes out on Tuesday, wheat the FOMC minutes say on Wednesday, how jobless claims come out on Thursday and finally what sentiment is coming out of the G20 meeting on Friday.


Overall it will be a higher start to the week as world pressure abates slightly. Oversold short term corn conditions entice buyers looking at the technical trend as a reason to buy. Wheat rallies with help from Minny with KC watching rain forecasts closely. The trend is higher today but do not get married to upside momentum ahead of WASDE.

Disclaimer: Past performance is not indicative of future results. Trading futures and options involves substantial risk of loss and is not suitable for all investors. Fundamental factors, seasonal and weather trends, daily news, and other current events may have already been factored into the markets. The use of stop loss or contingent orders may not protect profits and may not limit losses to the amount intended. Certain market conditions make it difficult or impossible to execute such orders.
 
#5
The Grains Review For the Week of January 3, 2012

The Grains Review
For the week of January 3, 2012​

By Matthew Pierce

Coming back from the New Year holiday break the market looks at a higher move based on the following factors. First, the Euro is holding ground against the USD sitting just over $1.30 to start the week. Sentiment towards a stronger Euro is growing with optimism over long term debt solutions gathering steam. Crude remains well over $100.00 basis Feb due to continued tensions between the US and Iran. This escalated over the weekend with an Iranian test of a cruise missile that would be capable of hitting a US carrier. I hope they are not that stupid to actually try. Both factors are within the recent traded range but the sentiment is more bullish today which also helped Asian markets to a higher trade. On the fundamental side traders have a rally in both Palm oil hitting 3 month highs and EU wheat which hit multi month highs. Both are following momentum garnered from the major weather story developing in Argentina and to a lesser degree Brazil. Over the previous 4 days they have seen .10-.40 of good coverage showers fall in Mato Grosso De Sol with Parana receiving .50-1.20. South into Paraguay and Argentina the rains were far less substantial which focuses the attention of the trade. Today traders are looking at scattered rains in Parana with MGDS drying out while Argentina remains dry. Temps are moderate to warm so no obvious threat from this input. Overall the fundamental factors are supportive of a continued rally from what was started last week.

Looking back a bit I see a solid recovery all over the floor. This is due in large part to growing technical momentum and bottom picking with the commodity sector under performing compared to equities. This is supported by a jump in OI in corn on Friday with CN up over 5,000. This should continue with plenty of money sitting around looking for a hot home for 2012. If the money moves in markets are looking at a continued rally through the WASDE report on Jan 12. At that point they will need a fundamental backing for the rally to continue. There is growing concern over a regional conflict which should continue to add premium to crude prices. If prices spike above $120.00 there is no doubt in my mind that corn and the rest of the floor will follow. If crude backs up on world recession fears around $70.00 the Ethanol bid will disappear hammering demand which will in turn hammer corn and agricultural commodity prices. If the Euro makes any move back towards $1.40 commodities will continue their pop. If the USD makes a move approaching $1.10 then commodities will suffer as currencies cap value. The macros are a major concern moving forward so continue to focus on these inputs while making any market move.


Disclaimer: Past performance is not indicative of future results. Trading futures and options involves substantial risk of loss and is not suitable for all investors. Fundamental factors, seasonal and weather trends, daily news, and other current events may have already been factored into the markets. The use of stop loss or contingent orders may not protect profits and may not limit losses to the amount intended. Certain market conditions make it difficult or impossible to execute such orders.
 
#6
The Grains Review For the Week of February 6, 2012

Coming back from Super Bowl weekend traders have nothing exciting beside the impending Greek debt default. This coupled to crude breaking hard should have agricultural markets on the defensive in spite of fading positive momentum from the overnight trade. All eyes are on European debt and the impact on the demand prospects for US commodities heading into the WASDE report this Thursday.

There are weather concerns in Argentina, Brazil, South Africa, Ukraine and parts of Eastern Europe. The recent snow storm in the central plains has alleviated some early drought talk but we still have issues in the Dakotas and MN. There is little room for error if we want to plant 95 million acres without hammering the national yield. A report came out during the session on Friday from a private analyst stating we (the domestic producer) need to start with yield expectations closer to 155 bpa due to expanded acreage moving into marginal land. I guess trend line yields are a thing of the past especially with corn on corn acreage taking a nosedive year after year. Informa came out during the session with lower estimates for all South American production. No shock to the trade but seeing numbers continually falling has helped budding momentum in beans. This is countered by reports from Argentina over the weekend stating recent rains have recharged soil moisture making early production numbers for beans more likely than the recent downside reductions. Western BA province has been the greatest recipient of rains in Argentina while Rio Grande De Sol has seen good rains during the pod filling stage. This could change estimates for the Brazilian crop dramatically so we will have to watch private forecasts heading into the USDA report. The trade is expecting a drop across the board from last months production estimates but the question is, how much versus expectations?

On the demand front, the US has a problem. Taiwan which is traditional US customer for both beans and corn skipped us over the weekend. This is a signal of further switches to South American shores due to a quickening harvest pace. AgroConsult stated 6% of the Brazilian crop is harvested versus 5% last year. A lack of major rains over the next week in Mato Grosse looks to pull more interest from US shores especially if coupled to the recent basis rally. The IMF estimates Chinese growth in 2012 at 8.25%. This is versus last years early projections approaching 10%. In comparison it may not look that good this year but lets not kid ourselves, 8.25% growth is phenomenal no matter what some analysts state. This bodes well for Chinese agricultural imports in 2012 but the question for the trade is where will it come from? Brazil and Argentina are going to eat into US demand as long as current currency considerations remain. I like China to import a massive amount this year of both corn and beans but I see much more coming from south of the equator than from US shores.

The macro side heading into the WASDE report are leaning bearish with Iranian tensions static in spite of Ayatollah stating Muslims should eradicate Israel. This is nothing new but it seems like a matter of time until one of Irans growing supplies of missiles is misfired. This will change the global landscape to a major degree so watching tensions here is imperative for long term position traders. If Israel throws the first punch the US is in a real tough spot. If Iran throws the first punch is gloves off and airstrikes on. Also watch EU debt talk with growing concern over Portugal and Spain with Greek default an almost foregone conclusion. Its a pathetic situation over there that looks to pull the Euro lower over the next couple months offering negative momentum to any budding agricultural momentum.

Heading into the day session markets have mixed momentum after the close of the overnight. Corn and wheat look to open mixed to lower while beans look to start higher. Whether or not it can stay higher is yet to be seen but pressure from macros and improving weather prospects in South America should have bulls on the edge of their seats. I see a trend lower into the report on profit taking by weak longs in spite of budding technical momentum. Spreads should speak loudly this week due to the Goldman roll period starting on Tuesday.

Overall look lower this week to start with nothing pressing that I can see on the demand side to help prospects heading into the WASDE report. I remain bullish corn long term due to South American problems coupled to early drought conditions in key domestic production states. I will look for spreads to be the biggest factor this week with macros dictating more momentum than fundamentals.


Disclaimer: Past performance is not indicative of future results. Trading futures and options involves substantial risk of loss and is not suitable for all investors. Fundamental factors, seasonal and weather trends, daily news, and other current events may have already been factored into the markets. The use of stop loss or contingent orders may not protect profits and may not limit losses to the amount intended. Certain market conditions make it difficult or impossible to execute such orders.
 
#7
Re: The Grains Review For the Week of February 6, 2012

i want52 week high low of all the ncdex products such as
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#8
The Grains Review For the Week of February 13, 2012

Coming back from the weekend I see a higher start to the week with momentum from the Euro and crude helping more than internal sentiment. The biggest factor here is the Greek austerity vote passing. Glad to see a vote without the agreement of a rioting populace helps European outlooks. This is a joke and should be considered one but it is not so markets will likely move higher. This is sentiment more than reality.

The agricultural markets are followers to start the week lacking any news with many waiting for next weeks USDA outlook conference in Washington DC. This meeting will offer the first official numbers farmers can use for planting intentions and pricing models for the 12/13 crop year. Traders do get the USDA budget today which will show expected cuts across the board but this is a minor issue in the big picture. The fact is, there is little to direct the market this week so expect a choppy directionless chop with wild swings for no particular reason. This will hurt front end volatility but I stand by my statement that volatility is too cheap in May and deferred contracts. The spring is winding and when it snaps back it will be a vicious move.

Overall today will likely be a higher session lacking any real fundamental or technical reason to do so. I like the bullish side in the long run but do not feel things have a catalyst to blow it up this week. Markets may have it next week with the USDA outlook but that is still some time away.


Disclaimer: Past performance is not indicative of future results. Trading futures and options involves substantial risk of loss and is not suitable for all investors. Fundamental factors, seasonal and weather trends, daily news, and other current events may have already been factored into the markets. The use of stop loss or contingent orders may not protect profits and may not limit losses to the amount intended. Certain market conditions make it difficult or impossible to execute such orders.
 
#9
The Grains Review For the Week of February 27, 2012

Special Recap: An Excerpt from Matt's Premium Daily Wire from Friday featuring analysis of the USDA Numbers.

The trade is digesting USDA numbers as they come out with the acreage released before the opening offering wheat a reason to move lower. 58 million acres will only add to burdensome stocks domestically and internationally. This does not explain the WH-K spread moving to a 3-inverse during parts of the day. My only theory here is blow outs by late entrenched bear spreaders coupled to logistical problems backing up what appears to be a real strong basis to unattractive levels.... Beans were supported by relatively small acreage as compared with corn and wheat but a lack of front end business could cap the rally into the weekend. Improved weather outlooks for Brazil also capped the front end spread pull so be aware of spread movements today for better direction into the close. I continue to feel beans more than any other is a pit ready to roll over. This market is bloated with fresh length hoping for an explosion that the 70 MMT Brazilian crop should easily counter.

The afternoon period brought further numbers from the USDA with Ethanol the glaring figure. A ceiling has been reached concerning domestic demand so new crop corn usage fell by 50 million bushels to 4.95 billion. This is not unexpected and adds to the mild bearish undertone of the trade heading into the overnight session. The overnight was not dramatic with a mild downside tone in spite of strong crude markets. Beans closed in the upper half of the range, corn and wheat near lows while products were mixed. Meal was supported while bean oil was lower on profit taking.

Looking at the day session markets first have to digest the USDA conference balance sheets. Corn yields set at 164 bu/acre is quite hopeful I think. Harvest acreage at 87 million produces a whopping 14.27 billion!!! Ending stocks with only minor shifts to demand are estimated at 1.616 billion bushels. This is a staggering number in my eyes based solely on the huge yield estimates. If we yield 146 production is only 12.70 billion, if we meet 2010 numbers production is 13.14 billion. This is by far the largest yield expectations traders will see on the year so I say do not get overly bearish after seeing it. Estimating ending stocks right now is very similar to picking the national champion in your NCAA basketball bracket. Yes, someone hits it but its not normally those, in the know. The numbers are early estimates based on computer models, not reality of any type. They do not figure in weather, drought monitor, fertilizer costs, crop rotation, seed availability, reality, agronomy or the new crop bean/corn ratio. The last factor is at interesting level sitting at 2.29. Remember that the decision line for producers is normally 2.25 so the choice is harder by the day as seed orders are placed. The 1-1 spread (see chart below) is sitting at $7.13 reaching for the range high around 7.40. At this level look for profit taking as technical pressure adds up. The acreage battle is in full effect with plenty of time to potentially change this spread dramatically.

Outside of the USDA numbers traders saw export sales impress again with beans the obvious feature. 3 MMT old and new sales were generally expected but the loadings are still way big! 1.207 MMT shipped with China taking 676 TMT. Corn was the only number that failed to reach the upper end of estimates offering a bit more downside momentum if fundamentals were all that mattered. A higher crude market, weaker USD and an overall sentiment towards bulls should help mitigate any losses into March option expiration on the close. Look for another choppy session with end week positioning helping set the tone into the latter parts of the session. I may be cutting my teeth on the wrong side of the market but I continue to feel this trade is overinflated in the short term.... USDA baseline increased wheat acreage to 58 million, increased yield to 44.5, set production at 2.165 billion bushels which increased ending stocks to 957 million. Exports remained flat while feed usage increased as SRW moves further into cattle rations. A non impact as compared with beans and corn but this does take into account much improved expectations for the winter crop. If anything changes for the HRW into spring these numbers will shift dramatically to the bull side.

USDA baseline left beans planted acreage at 75 million as compared with last year, increased harvested acreage by 500K (How the hell do they do that?), actually increased yield marginally and increased production by 200 million bushels. The math simply does not work here in my opinion. They increased crush by 35 million bushels, increased exports by 275 million bushels which lowered ending stocks to a shocking 205 million. This is the most bullish baseline number of the big three. What if we do not increase harvested acreage? That puts ending stocks at 165 million which makes many really uneasy and changes the game moving forward. Couple this to the outlook for Argentina and China is sitting on the hot seat.

Overall the USDA offered traders a few nuggets to focus on. Look at corn acreage, corn yield, bean harvested acreage, bean exports and crush and spring wheat acreage estimates. An interesting report that leaves the trade leaning more bullish than they were just a few days ago. This also explains the expansion of the SX/CZ ratiothe acreage battle is now on!


***chart courtesy
Gecko Softwares Track n Trade Pro
Past performance is not necessarily indicative of future results.


Chart:

Corn, Dec-12/Soybeans, Nov-12 - Today's USDA numbers changed the outlook for this spread. Beans likely need to fight tooth and nail for acreage so this spread could easily eclipse recent highs around 7.40, in my view. It will be a tough road with all the recent fund length likely to take profits against the range highs but fundamentals are changing quickly so I say do not load up on the bear side as this approaches 7.40. If you must be bearish....


Disclaimer: Past performance is not indicative of future results. Trading futures and options involves substantial risk of loss and is not suitable for all investors. Fundamental factors, seasonal and weather trends, daily news, and other current events may have already been factored into the markets. The use of stop loss or contingent orders may not protect profits and may not limit losses to the amount intended. Certain market conditions make it difficult or impossible to execute such orders.
 
#10
On Friday markets saw a very messy trade. Early weakness in corn and wheat was erased as both followed beans to the upside. On the close, wheat popped to daily highs as positive floor momentum and strength in KC and Minny helped support the trade. This feels more like short covering (backed up by losses in OI) than anything on the fundamental side so I do not look for momentum to continue in Chicago where as KC and Minny have some reasons to continue higher as demand and weather remain issues. KC remains an unknown with the HRW crop sure to experience problems if below average precipitation and above normal temps persist through March. The SRW crop should have far fewer problems if the drought monitor is believed. Minny is again bullish due to commercial receipt ownership and talk of acreage losses to Canola and other small grains in northern regions. The acreage war in northern states should be a hell of a show this year with vegetable oil crops moving in on historical wheat land. Talk of corn seed delivery problems from DeKalb in the Dakotas adds to the issues in that region heading into the planting season. Corn saw a tighter trade in CN-Z and a move to an inverse in CH-K. The latter speaks bullish for corn but crude and a weak Euro kept the market in check. Flat price remains stuck in the established range looking for a catalyst that traders probably wont get on the WASDE report this Friday. No corn receipts out there offers more momentum to CH-K but time is running out to see this spread move. I cannot favor a higher bias in corn due to improved conditions in Argentina, weak demand from China and a wetter 30-day forecast for the northern plains and IA. This 30-day forecast was offered by Elwin Taylor of ISU on Friday during the session. This was the only area of concern preplanting so what is the upside catalyst from here? Beans saw good strength in SN-X closing the week at 42 but if this market is so bullish and there are no receipts out there why is SH-K trading at a 5-cent carry? I cannot make heads or tails of that situation. It points to a money flow issue more than a fundamental supply side rally. Demand is quiet and basis is flat to soft not backing up the bullish sentiment. Another factor on Friday was oil share blowouts with meal gaining heavily against oil. There was blood in the water early but FC Stone helped support the trade easing damage into the latter part of the session. Volume was light across the board not helping my interest in following the well over extended rally.

I have been bearish for a while believing this market needs to take a breather before a next possible leg higher. I believe late comers normally portend the end, not the beginning of a real rally. The market does have small issues right now but with S. American harvest and a steady USD there is little to feed the bull so look for more profit taking ahead of the expected dud USDA report. Any change in the Greek debt situation will directly impact the agricultural market so focus there for best macro direction.

The overnight session saw minimal activity with Cotton the biggest feature. Cotton moved limit higher on the Indian export ban. India stated a need to secure domestic supplies before they can authorize exports. No timeline has been set in place. EU wheat was modestly higher following Fridays momentum more than anything seen via the overnight trade. Fresh demand is quiet after Syria passed on a tender for 100K milling wheat.

Coming back from the weekend the trade is mixed to higher with corn and protein wheat leading modest upside momentum. Weekend rains were disappointing for some in Brazil and Argentina putting bears on notice this week as traders move into the WASDE report on Friday. Domestic weather offers nothing bullish with southern planting moving along well while northern snows fall in the eastern Dakotas. Coming from Twitter contacts (Thanks Kyle), Shreveport LA should be done this week with high hopes for a good start. South American weather looks wet in central Argentina today and tomorrow offering good chance for beneficial rains. Southern Brazil is dry through the end of the week putting stress back into the crops there. Recent rains in Mato Grosso have stalled harvest only slightly with Brazil still ahead of historical pace. Nothing compelling in either direction to help break the back of bulls or blow bears out of the water.

The week should start quietly but there is no doubt in my eyes that traders will see fireworks this week. The big question is which direction? Do these markets see profit taking ahead of the report? Do they see old/new spreads back up as demand wanes and basis fades? Do they see a fresh flow of money into the trade looking for one last leg higher? Does the Euro collapse under the weight of extreme debt or will another German led bailout save the day? Will crude maintain the Iran/Israel war premium or will the Iraq export news curb momentum there? Are current Argentine rains viewed as positive or negative by the trade? Will todays export inspections support the front end or foreshadow a pullback? These are just a few questions I am addressing this week ahead of WASDE on Friday morning.


Disclaimer: Past performance is not indicative of future results. Trading futures and options involves substantial risk of loss and is not suitable for all investors. Fundamental factors, seasonal and weather trends, daily news, and other current events may have already been factored into the markets. The use of stop loss or contingent orders may not protect profits and may not limit losses to the amount intended. Certain market conditions make it difficult or impossible to execute such orders.
 

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