Grain Market Chatter Closing Comments 02/05/2015

Craig’s Closing Grain Market Comments

February 05, 2015

As we have seen in recent days, the strength or weakness of the dollar and the price of crude oil can have a significant impact on grain prices.  With that in mind I find it interesting that many traders I talk to are saying they wouldn't be surprised to see crude oil prices trade below the $40 level. Some people in the energy trade believe we may end up with the largest crude oil inventories the USA has seen in the past 80 years. If that turns out to be true one would have to assume that excess supply will start to create storage issues and this in turn could create the climate that will result in the final leg lower in price.

Corn:

It was another session in which much of the talk centered on crude oil and the dollar.  With energy prices higher today and the dollar trading lower we found support for the corn market.

Weekly export sales came in at 33.3 million bushels which was within the range of trade estimates.  As you can see on the following chart we continue to see the weekly sales come in better than required to achieve the SUDA annual export sales projection.

The next USDA report will be February 10 and we are already getting some folks gazing into their crystal ball trying to project the USDA numbers.  As I write this the average trade guess is that the ending stocks will be projected at

1.879 billion bushels, up ever so slightly from the 1.877 billion bushels projected in the January report.  World stocks are projected to come in at 189.3 MMT which would be up 0.1 MMT from the January projections.

Technically speaking all three of my technical indicators have turned bullish.

Soybean:

Weekly export sales came in at 17.99 million bushels which was at the top end of trade guesses.  It was interesting to see that this week’s report also offered a correction of last week’s numbers, if fact last week’s beans sales were revised nearly 5 million bushels lower than reported last week.  For the year total soybean sales stand at 94.3% of the USDA forecast for the marketing year versus a 5 year average of 88.8%.

It appears as if the Indonesian government is going to increase biodiesel subsidies.  The proposal must pass another vote later this month but the prospect has caused palm oil prices to enjoy their biggest gain in over 4 years.  This has in turn pushed soybean oil higher and been supportive to soybean prices.

Heading into the Feb. 10^th report the average trade guess is for a soybean stocks number 398 million bushels, down from the previous USDA estimate 2014 of 410 million. 

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

Wheat:

In the wheat market today we benefited from the weaker dollar as well as some fund activity.  We saw traders unwind spreads by buying wheat and selling corn.  For the session the funds were buyers of roughly 4,000 contracts.

We heard reports of renewed fighting in Ukraine today which may have been supportive.  Ukraine definitely has problems.  Ukrainian currency dropped 34% versus the USA dollar on the heels of a report from the Ukrainian Central Bank that it would no longer be able to support it through monetary policy.  This currency break makes Ukrainian grain the best game in town and should send folks looking for wheat and corn to that market first.

Weekly export sales came in at 14.6 million bushels which was near the top end of trade guesses.  As illustrated by the following chart, we continue to export at a pace which, if maintained, will bring us in above the current USDA projection.

All three of my technical indicators are currently bullish both the Minneapolis and Kansas City March futures.