Grain Market Chatter Closing Comments 01/21/2015

Craig’s Closing Grain Market Comments

January 21, 2015

Ethanol numbers will be delayed until tomorrow.

Corn:

We continue to trade in this sideways to lower price range in the March corn.  Talk around the globe is not necessarily support at the moment either with rumors of the Ukraine becoming competitive in the export market and crude oil continues to get cheaper putting a crunch on gross ethanol margins.  Not only are falling crude prices hard on ethanol margins but, it’s hitting home in the general economy and since Crude and Corn have a long history of a direct relationship you can expect corn prices to come under pressure.  The oil conundrum is causing grief on a lot of fronts that are all probably weighing on our grain prices.  Off-Shore US drilling rigs are at a 16 month low.  The Permian Basin of Texas and NM shut off 15 rigs last week.  This fall out is starting to hit home.  Schlumberger Ltd is cutting 9,000 jobs and reducing spending 25%, Royal Dutch Shell just cancelled a $6.5 billion project in Qatar and Suncor Energy has let go of workers in Canada.

It is nearly time to start looking forward though, and 2015 brings many unanswered questions. 

•          How many acres will we plant?  Average trade guesses range from 87-90 million with anything over 89 being seen as bearish and sub 88 may be viewed a little bullish.
•          Where will USDA start their yield estimate?  They are going to put a starting number out there along the trendline like between 165 and 167.  A 10/12 bushels drop due to weather would certainly be something for the bulls to grab while anything over 167 will probably keep a lid on the prices.
•          South American productin?   Most of these answers hinge on 2^nd crop corn production which needs to be planted by late-February.  Stay tuned, this could be a developing story.

Technically, two of three indicators remain bearish with only the stochastics rebounding from oversold territory.  Running our numbers against the recent move started Oct. 1^st when we put in the low of $3.30 you can see that, so far, support is holding in the area of $3.74.  If I was to set some targets now to reward any gains in the market I would be shooting for $4.17.  Longer term, I would be looking at $4.25, which is the upper side of the gap from July 7^th.

Soybeans:

Beans are just no fun to talk about.  We have now seen this market loose nearly $1 since the report last Monday and it’s not looking to find a reversal anytime soon.  Record production in S. America is a huge factor sitting over our head right now.  Their harvest pace is actually running ahead of average with report yields 5-10% better than last year’s record crop.  One glimmer of hope when it comes to S. America is that growing the crop is only part of the equation; they still need to get the beans to town and get them loaded. 

And then there’s the US farmer who is talking about planting even more bean acres in 2015.  I understand the math, you plant what you think you can make money on, but more acres create more supply = lower prices.  What a vicious cycle.

Another potentially good thing today was that the USDA did not announce any old crop bean cancellations. YEAH.  Not only that, they reported a new Chinese sale for this year of 176,000 mt.  Although this failed to rally support in the bean market it is good news.

Technically, all three indicators remain bearish.  The side-ways trade that has been established since late October has been enough to build us some additional support; however, this is the second day in a row now that we have not been able to muster a close above the last level of support at $9.87 making me wonder if we are now headed for the October low of $9.22.  Not real sure how much hope I have right now that we will see beans fight their way back up into the $10.90 are; however, I’m not willing to totally waive the white flag.  At some point we should see some sort of rally, even if just a correction, so I would probably get some targets working in the areas for $10.05, $10.25 and $10.50.

Wheat:

Early in the session a sharply lower dollar provided some support to the wheat markets; however, as the dollar recovered wheat fell later in the day.  US demand remains suspect as feed-usage shrinks and export demand remains less than ideal.  There are a few headlines the trade is paying attention to however, like tensions brewing between Russia and the Ukraine.  Russia continues to talk about export restrictions; however, they will not happen February 1. 

In Hard Red Spring, all three technical indicators are again bearish.  The stochastics have been trying to find some buying momentum indicating a bullish signal yesterday, but it’s been a tough go.  I am kind of in the same boat as Craig is here.  Not positive I am really friendly wheat in the long term; however, this is a beat-up market that is really in need of a bounce.  The MACD is trying to come into line and we did manage to trade up to the 10-day moving average today. So maybe this market is slowly building up steam.  Just in case we see that little pop up, I would have sale targets in at $6.10 and $6.45.  Keep in mind though that $5.95 has been an area to watch, this is the last leg of support that should have held us, however, for 5 days now we haven’t be able to close over it.  If this market doesn’t muster a close above that $5.95 you better mentally prepare yourself for $5.41. 

The Kansas City is just as uneventful; however, the stochastics are wanting to issue a buy signal in oversold territory.  We continue to move to test the old lows @ $5.55 with the first level of resistance at $6.12.  If I needed to put in some targets I would be looking at $6.10.