Grain Market Chatter Closing Comments 01/28/2015

Craig’s Closing Grain Market Comments

January 28, 2015

In this price environment having an understanding of the market and how to create a marketing plan to respond to it may be very important.  I will be putting on a series of marketing meetings this winter in an attempt to help you with these decisions.  The schedule of meetings for this week is as follows:

January 29th – Bowdle NCFE’s new chemical building at 3 p.m.

January 30th – Lebanon NCFE Office at 1:30 p.m.

Corn:

If all you had done today was look at the weekly ethanol report you would have assumed that the corn market would be trading higher.  The weekly report showed that 102.69 million bushels was consumed in the production of ethanol last week.  As you can see on the following graphic, this is well above the pace that we need to maintain in order to achieve the USDA’s annual use estimate.  In fact for each of the past nine weeks we have exceeded the weekly number that we need to average to hit the USDA’s target.

Of course, the market is a little more complicated than this one issue.  The trade still is reacting to yesterday’s somewhat surprising bearish planted acres projection released by the US Congressional Budget Office and that pressured the market during today’s session.

Also pressuring prices today was the expectation of better than expected production out of South America.  It seems the trade is looking for slightly higher second-crop production out of Brazil and slightly higher overall production out of Argentina.

Finally, we can’t underestimate the impact of the strong dollar.  With the dollar trading higher once again today it also cast a bearish pall across the grain markets.

Technically speaking all three of my technical indicators are currently bearish.  I think that the most significant event that happened in any of the grains today was in the corn pit where the market closed below the 100 day moving average.  Soybeans and wheat had previously done so and experienced additional selling as a result.  The life of contract low for the March futures came on October 1^st of last year at $3.30 ½ and with today’s price action I would be surprised if we don’t take that level out and trade lower.

Soybean:

This market is really quite easy to understand right now.  We see China continue to cancel bean purchases from the USA and at the same time South American weather appears to be slightly improving.  So we see the market removing weather risk premium as well as pressuring prices as a result of Chinese demand moving to South America.  There is no place on planet Earth where those circumstances would be described as anything less than bearish.

All three of my technical indicators are bearish at the current time and as the bean harvest in South America progresses I would expect the market to challenge the life of contract lows. 

Wheat:

We have a pretty benign weather story right now and that coupled with a strong dollar and weak exports have kept the wheat market on its heels. 

I have been saying for some time now that wheat is oversold and I still feel that way although had I acted on that conviction I would be getting killed by the market right now.  It does appear as if the drop in prices is generating some additional feed demand.  Heaven knows we have enough poor quality wheat this year to meet that demand but perhaps the fact that we are seeing additional demand for feed wheat is signaling that the low may be within sight.

All three of my technical indicators are currently bearish both the Minneapolis and Kansas City March futures.  Yesterday I ran the Kansas City March futures chart showing that we had established a new life of contract low.  We have not yet established a new life of contract low in the Minneapolis markets but with the March contract now only $0.14 away from that low of $5.41 it seems inevitable that we will take it out and trade even lower.