Soy Complex
Beans remain resilient. There continues to be enough of a weather worry in Argentina for managed money funds to continue to buy dips. That’s exactly what we saw this week. Needed rains need to show up as forecasted in the central growing areas of Argentina or the crop will suffer further downgrades. The Rosario Grains Exchange in Argentina already has lowered their bean estimate to 40.0 million tonnes from 46.5 previously. Other crop scouts and Ag consultants see their crop at 38 to 39 million metric tonnes. These estimates are close to 40 percent of what was thought to be produced in early January at 57 million metric tonnes. Despite the raising of the Brazilian bean crop to 116-17, million metric tonnes, which should cover some of the Argentenean loss, the noise in the market and from funds is all about Argentina. Also of note was the February bean crush number at 153.7 million bushels released yesterday. The number was a record for the month of February and above the average trade guess of 149.4 million bushels. This tells the market demand remains strong and commercial demand for meal is robust. Meal continues to bounce off the 370 level basis May futures but has been stuck just above 372 for the last three sessions. For beans, I’m going to await the Sunday night open and see how weather develops before I suggest a course of action. I suggest in the interim that one uses meal as a trigger for entering new positions. If we get a close under 368, meal in my view will fall all the way to the low 350’s and drag beans with it. However a close above 381.6, major trend line resistance, get long beans and meal in my opinion. More on Mondays report.
Wheat/Corn
Wheat got crushed this week and lost to corn. To be honest there isn’t much else to say. We have been advocating buying corn vs KC and Chicago wheat. Contingent upon support holding at 524 then 513 in May KC wheat and 494 in May Chicago. These levels were taken out by funds as the long position in Kc has been abandoned for now while funds build their short position in Chicago. Trader Psychology on wheat has changed for now as the weather premium has eroded and therefore the buying. Look for Chicago wheat to challenge 465 basis May before bouncing. WX risk, the top Ag weather site, still sees drier conditions in the areas of the winter wheat belt hit hardest by drought to receive little or no rain in the next two weeks. Conditions are still dire and when the crop comes out of dormancy I can see the trade pushing higher once again. Chicago wheat vs corn lost 15 cents this week to close just above support at 85 cents wheat over. We suggested selling KC at 1.36 over corn last week and for those who took advantage were rewarded. That spread finished at 1.16.6 gaining almost 20 cents from our suggested entry. This level is a 50 percent retracement from the low in January at 78 cents over to the high on March 7th at 1.57. If short I suggest booking profits and to reassess. One can always re short if market conditions call for it. Like beans, I’m interested in seeing where rains come in the winter wheat belt into month end and into April. Then trade accordingly.
Each Thursday I hold a weekly webinar on the grain and livestock markets at 3 pm central time. Attendance is free and a recording link will be sent to your email upon signup.