Grain Market Chatter Closing Comments 01/20/2015

Craig’s Closing Grain Market Comments

January 20, 2015

Corn:

Early on in the session the market was getting smacked around by a sharply stronger dollar and weak energy prices.  That coupled with good South American weather had the market backpedaling faster than an ant trying to avoid an elephant stampede.  However, that misfortune was reversed as traders started playing the corn/bean ratio game.  The conventional wisdom is that if this ratio gets too far out of line we will not get enough corn acres and that thought process was credited with creating the buying that pushed this market to a higher close.  For the session the funds were net buyers of 6,500 contracts of corn and are now long 150,400 corn contracts.  If they ever decide to get net short it will be a blood bath.

Weekly export inspections were out today and they helped the bull cause as well, coming in at 29.4 million bushels which was at the top end of the trade guesses.  For the year we are now standing at export inspections totally 30.1% of the USDA annual projection.  The five year average for this point in time is 34.8% so inspections are running a little short of what we would normally expect.

Technically, two of my three technical indicators are currently bearish.  I find it interesting that we had a low of $3.76 on January 14 and then again on the 15^th.  This double bottom coupled with the fact that this is the one grain that is currently trading above the 100 day moving average is supportive. 

Soybean:

Last Friday we had the announcement that China was cancelling a soybean purchase and today we had another announcement in the same vein.  When you start the day with news that your top customer is cancelling purchases it tends to set a negative tone and that was certainly the case today. 

Oddly enough, while the cancellations captured the headlines the weekly export inspections report was released today and showed that for the week end January 16^th we had export inspections of roughly 55.8 million bushels.  This was just above the top end of trade guesses.  Still, it is just a matter of time until we see the bean export business transfer down to South America.

Speaking of South America, the weather on that continent has been front and center for several weeks now but it appears as if the weather patterns in South America will continue to be favorable with temperatures at or near normal for the major growing areas.  We still see some pockets of dryness in northern Brazil but overall the weather remains favorable for good crop development. 

No big shock here, all three of my technical indicators are still bearish.  On the 14^th I wrote that, “Longer term I would not be surprised to see the October 2014 lows challenged.”  I don’t know what I thought “longer term” was but this break has been more sudden and extreme than I thought that it would be.  We may get a bounce one of these days but it needs to be viewed as a selling opportunity.

Wheat:

We had low expectations of the weekly export inspections for wheat and were able to meet those diminished dreams.  For the week we had export inspections of 11.4 million bushels.

We did hear the war drums beating again today as rumors that Russian troops were massing on the Ukrainian border provided enough uncertainty to send sellers running to the sidelines.

In the marketing meetings that we put on last week I noted that I thought the wheat market was very oversold and in need of a corrective bounce.   That, more than anything else, may be what we started to see today.

All three of my technical indicators are currently bearish both the Minneapolis and Kansas City March futures.  As noted on the following chart, we are trading below the 100 day moving average which is never a positive sign.  I look for support in the Minneapolis March futures at $5.74 and if that levels fails to hold we could see a test of $5.40.