Grain Market Chatter Closing Comments 01/27/2015

Craig’s Closing Grain Market Comments

January 27, 2015

It was interesting to see the dollar set back today.  If that is the start of a long term trend and not an isolated day down in an otherwise upmarket it could eventually be supportive to grain prices.  We will have to see how this plays out.

Corn:

The export market is kind of interesting right now.  We are seeing Ukrainian corn offers continue to weaken.  I am hearing that some Black Sea corn traded into the Asian Rim countries last week and this has led to speculation that we could see corn sales from the USA switched to Black Sea origin corn.

The US Congressional Budget Office took a shot at projecting planted acres and harvested bushels for 2015 in a report released today.  They are projecting that farmers in the USA will plant 8 million acres of corn this year.  Last year we harvested 91.72% of the planted acres so if that holds true we would harvest roughly 81.63 million acres of corn.  They are also projecting that we will have a total crop size of 13.496 billion bushels.  That would work out to a national average yield of roughly 165.3 bu/acre.   If we assume that we will have a carry-in of 1.877 billion bushels and once again import 25 million that would give us a total supply of 15.398 billion bushels.  On the demand side of the equation let’s, just for the sake of argument, assume that demand is a little stronger than what is projected this year and plug that in at 13.8 billion bushels.  That would then give us a projected carry-out of 2015/16 of 1.598 billion bushels and would probably argue for prices a little stronger than the current levels.

Technically speaking all three of my technical indicators are currently bearish.  You will not on the following chart that we are still trading above the 100 day moving average.  When we took that out in the soybean market it brought on another wave of selling, should that level fail to hold in the corn market I would anticipate more sellers entering this market as well.

Soybean:

When you start out the day with news of China cancelling a purchase you know the market is probably going to struggle.  That is the situation we were faced with today as word came early of the Chinese cancellation of a 120 TMT contract.  That started the market off on a lower tone and it was never able to recover. 

With a few exceptions, we continue to see very good weather in South America.  Without a credible threat of weather concerns in South America and the prospect of a record crop looming the path of least resistance continues to be to the downside.

Looking at the upcoming crop year here in the USA I see that the US Congressional Budget Office is projecting that farmers as a collective unit will plant 86 million acres of beans this spring and harvest a crop of 3.829 billion bushels.  It seems a little early to be making that precise a claim but if we accept that at face value, bring in the projected 410 million bushel carry-in and assume once again that we will import 15 million bushels that would give us a total supply of 4.254 billion bushels.  If we assume the demand at the current number of 3.666 billion bushels that would leave a projected carry-out for 2015/16 of 588 million bushels and that in turn would probably send prices much lower.

All three of my technical indicators are bearish at the current time. 

Wheat:

I kind of sound like a broken record (and the fact that I would even use that term also indicates that I am old and out of touch with today’s technology.  I have no idea what the equivalent of a broken record is) but the simple fact is that this market is oversold and in need of a bounce but just can’t seem to muster one.  There was some word in recent days of renewed conflict between Russia and Ukraine but apparently that is no longer enough to launch a shot higher in this market.

The Congressional Budget Office is projecting total wheat planted acres for 2015 to come in at 55.5 million acres, down from the 56.8 million planted in 2014.

All three of my technical indicators are currently bearish both the Minneapolis and Kansas City March futures.  As you can see on the following chart, in the March Kansas City futures today the contract set a new life of contract low.  Not exactly the kind of event we want to see happen but pretty indicative of the state of the wheat market these days.