March corn rallied to new highs last week, but ultimately settled the week 6 cents lower. There wasn’t any fundamental news event that triggered the late week fall, but rather the decline was a function of reduced speculative buying. Improving South American weather and a U.S. corn stocks/use ratio of 15-16% hardly argues for a net long fund position in corn. The push higher by fund managers of all asset classes speaks to an inflationary or anti-dollar investment. Longer term it will be difficult to be bullish of corn unless U.S. and world balance sheets change dramatically. Soil moisture in Central and Northern Brazil is much improved from last year and safrinha corn planting is occurring on a timely basis. Without a 2nd consecutive drought, South America’s exportable corn surplus will be boosted some 25+ MMTs (1.0 Billion Bushels). As such, the US big crop/big demand market turns into one of big crop/shrinking demand profile. As U.S. export demand deteriorates, the only real means to sustain a lasting corn rally is most likely a dire Midwest drought this summer.
Wheat futures hit new 10 month highs at mid-week but settled lower as fund buying faded. The recent CBOT rally pushed Gulf hard red winter wheat to premiums of $20-30/MT above other origins, and as such worked to slow export demand on the margin. Like corn, there’s little new fundamental input to report, but the CBOT rally was overdone and May futures are viewed as overvalued above $4.60. There are still concerns over dryness across the W Plains and across pockets of W Europe, but WX Risk the Ag weather site sees declining spring drought conditions across eastern Kansas and much of Oklahoma in the next 1 to 2 months. Without a weather premium being fed to the market, record world carryover stocks and expanded winter wheat seedings in the Black Sea should stymie rallies. The coming South American corn supplies will provide further competition for global feed export demand, and on the margin, US corn/wheat export interest will begin to slow in April/May.
Soybean futures traded within the prior week’s range and closed lower by 26 cents in the March contract. After spending weeks fretting about S American weather, the trade potentially has shifted bearish as Brazilian field yield reports are coming in much better than expected. Harvest is quickly advancing, with Mato Grosso now 52% complete, with Mato Grosso do Sul, and Goias each near 40% harvested. Even RGDS in the far south has harvested 5% of their soybean crop. The fast and early harvest is allowing for a record Brazilian export pace as U.S. shipments are now seasonally slowing. Strong exports and S American crop uncertainty has supported U.S. prices up over the last several months, but that support is fading. The U.S. planting season is now fast approaching with Delta planting now just weeks away. Given the huge new crop soy/corn price spread, new crop planting intentions are expected to show record large soy acres. Funds now hold a massive net long position in soybeans. Without major weathers issues emerging again in Brazil and more importantly in Argentina, the path of least resistance looks lower.
Technical’s read like this for this week. For March soybeans support is down at 10.21 and with a close under 10.10 is next. Resistance is up at 10.53 and then 10.74. For March corn support comes in first at 3.64 and then 3.60. Resistance comes in at 3.76 and then 3.84. For March wheat support comes in at 4.33 and then 4.24. Resistance is up at 4.56 and then 4.72.