WalshWalsh Trading’s Weekly Grain Report
March 3, 2017
Fund buying and the re-inflation trade dominated this week despite prominent analysts calling for larger South American grain stocks. The trade for the most part is eschewing supply/demand fundamentals as fund managers of all asset class types continue to use dips in the grain market as buying opportunities. The buying by managed money along with trend and index following funds has occurred throughout most commodity sectors. All time highs in equities and strong rallies in metals and energies have spilled over to the grain sector. As a result rallies in corn and beans which have been deemed cheap by these funds as a potential hedge against the Dollar in this first fiscal quarter. This week’s grain trade was not without some bullish fundamental news which occurred mid-week with rumors abounding that the Trump administration was set to announce proposals that would renew the bio-diesel tax credit which would prohibit foreign imports and could boost U.S. soy oil demand by 500 million pounds. It was also rumored that the EPA would allow E-15 to be sold all year long and mandate to increase the percentage of total use longer term. If the rumors become reality, corn and soyoil markets are the most to benefit from the eventual unexpected and somewhat unforeseen increase in demand.
The bearish side of the coin for both corn and soy continue to be the impressive results from what’s being grown and coming out of the ground in South America. Brazil’s soybean harvest looks to be in the neighborhood of 107 to 109 million metric tonnes, a record crop by far while Argentinean soybean crops look to come in around 55 million metric tons. On top of that the March 31st planting intentions report looks to show soybean plantings at or near 90 million acres, also a record. I propose looking to be a seller on rallies as China remains absent on flash sale export announcements and South American weather aside from northeast Argentina looks optimal for the next ten days. Those looking for a trade idea may consider the following. Look to buy the July bean 10.00 put while selling 2 of the 12.40 calls for even money. This put/call ratio settled at positive 3 cents to end the week, so a futures rally is needed to achieve the proposed bid price of even.
Technical’s read like this for this week. For May soybeans support is down at 10.18 and with a close under 9.97 is next. Resistance is up at 10.57 and then 10.76. For May corn support comes in first at 3.70 and then 3.59. Resistance comes in at 3.89 and then 3.97. For May wheat support comes in at 4.41 and then 4.28. Resistance is up at 4.62 and then 4.72.
For those interested I hold a weekly grain webinar each Thursday at 3pm. It is free for anyone who wants to sign up and link for sign up is below. If you cannot attend live a recording will be sent to your email upon signup.
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http://christianawalsh.wix.com/bnc–cl-lusk
Sean Lusk
Director Commercial Hedging Division
Walsh Trading
312 957 8103
888 391 7894 toll free
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slusk@walshtrading.com
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Walsh Trading
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