Written by Chris Robinson
Corn: CK finished up 1 ¾ cent at $5.01 ¼. New crop CZ settled up 5 ¼ cents at $5.06 ¾, which is a NEW 7-MONTH HIGH SETTLE. For the week, CK gained 8 ¼ cents, while CZ gained 19 cents. CZ has now gained 57 ¾ since its 3-1.2 year low settlement posted in January, down at $4.49. This is net gain of 13% over the past 12 weeks. The funds were early sellers and late buyers as they continue to defend their biggest long position since the drought of 2012. Last estimates had the funds long over 250,000 contracts. Another winter storm is forecasted for the Midwest, but as always, the trade will react to updated forecasts. While weather bulls talk of El Nino and cold sub-soil temperatures, April 4th seems a little early to “kill” this crop. Technically, CZ completed a large outside-week-up on the charts. May corn has support on the chart down at 4.73 ½ and then $4.63. Resistance above comes at $5.12 ½ (Monday’s 7-month high) and then $5.27 ½. Hedgers: Roll up both put options and call options following this rally. Try to take as much risk off the table prior to next Wednesday’s WASDE report.
Wheat: May wheat finished down 6 ¼ cents at $6.69 ¾. July Wheat settled down 5 ¼ cent at $6.76 ½. For the week, May lost 25 ¾ cents while July lost 22 ¾ cents. May wheat posted a 1-month low at 6.58 ¾, Looking at the charts, WK has posted a long-term triple top at $7.22-$7.23 going back to July of 2013. This level will be the upside target bulls will have in their sights for the time being. As for WN, $7.12 to $7.25 is the upside bands of resistance the new crop bulls will be shooting for as well. The wheat took the brunt of sales as funds bought both corn and beans this week and sold wheat against those longs. On Monday, we’ll get a fresh crop condition report for wheat. Any surprises could create more price volatility for wheat traders. After a 2-month, $1.70 rally in May wheat, and a correction on profit taking is hardly that surprising. $6.58 represented a 38% retracement of that up move. Even with today’s lower settlement, WN is 21% higher than its January low! The next support for May wheat comes at $6.38 ¾ and then $6.18. Hedgers: No change in recommendations. Take risk off the table where possible prior to next Wednesday’s WASDE report.
Soybeans: May soybeans settled down 1 ½ cents at $14.73 ¾. November settled up 5 cents at $12.08 1/2 which is a 7-month HIGH SETTLE. SX has rebounded nicely from its 2-year low settlement in January down at 10.97 ¼. Today’s settlement marks a 1.11 ¼ rally, or 10% gain in value. A rally to new 7-month highs is impressive considering the USDA acres at 81.5 were 2 million acres above the average guess. Chinese cancellations continue to be a wet blanket on the spot-month fundamentals, yet we are within spitting distance of $15.00 beans. Is there something going on in the export market that isn’t currently obvious? This market continually laughs off any bearish fundamental news. Chinese crushers are clearly over booked on their purchases, and have been wheeling and dealing to re-sell cargos and back pedal as fast as possible on earlier booked cargos. With over 1.3 billion souls to feed, not to mention over 300 million hogs; their current overbought situation might rapidly correct itself. The funds remain long over 180K contracts of beans, and will not be quick to walk from that position as long as the trend remains in their favor. The SN/SX old crop-new crop spread remains near the $2.50 level, and bulls are touting El Nino as the wildcard that will feed the bull through the summer. That spread was trading at 15 cents at this time last year. Hedgers: Roll up your put options as well as any profitable calls on this rally. Take risk off the table where possible before next Wednesday’s WASDE report.
This was an interesting week with a lot of good action in the grains as well as the outside markets. The Stock indexes traded to record highs today, and although they ended lower, they are still near record high settlements. Opinions matter, but at the end of the day, the price is what is concrete.
This translates to the grains as well. Prior to Monday’s report, everyone had their opinion. In the wake of that report, based on the numbers, we had price action which at first glance, “makes no sense” to a lot of people. As long as the funds are long, they will defend their position.
These markets can change very rapidly. This week we finally had a sustained sell off in the meats after a great rally higher. There was a rumor that China was looking to reduce US pork imports because of the PED virus. We already have had 1 mmt of corn rejected by China for GMO issues. Throw in the cancellation of previous bean purchases and you have an interesting “what if” setting up, which could have very real and very negative impact on livestock as well as grain prices. Luckily we have had 2014 gift producers with a great rally so far. Hopefully, this rally is just the start of better things to come, but with corn and beans both up over 10% in the first 3 months and wheat up over 20%, it’s a rally worth celebrating.
With the herd looking up and prices the highest since September of 2013, it’s a good time to 1) be thankful and 2) do some risk management. If prices go higher, you’ll be able to participate. We want you to keep your upside open, ALWAYS. We remain committed to helping our clients reach the goal of pricing their physical grain in the upper 30% of available prices this marketing year.
Have a great and safe weekend!
CER