Grain Market Chatter Closing Comments 02/12/2015

Craig’s Closing Comments

February 12, 2015

In our meetings this winter we have talked about crude oil prices and the impact they could have on our markets.  With that in mind I think it is worth noting that USA crude stocks rose by 4.868 million barrels last week to reach nearly 418 million barrels, the highest since records began in 1982. I have heard some talk that we may be running out of storage space if the stocks continue to rise.  This leads me to believe that we may not have seen the low in crude oil yet and if it sinks it may depress corn prices as well.  The following is a weekly chart showing the spot futures price for crude oil (black line) and corn (red line).

Corn:

We started the day off with a very strong weekly export report.  Weekly export sales checked in at 39.5 million bushels which was above the top end of trade guesses. 

We also had the much anticipated Conab report with their estimate of the Brazilian crop size.  They pegged the Brazilian corn crop at 78.3 MMT versus the recent USDA projection of 75.0 MMT.  We also had the Rosario Grains Exchange place the Argentina corn crop at 22.5 MMT.  This was pretty much in line with the USDA forecast of 23 MMT

We had the dollar sharply lower today while crude oil mad e nice move higher.  One would have expected this combination to be supportive to corn prices but instead we traded lower as the trade fixated on the ideas of a big crop in South America and ample world supplies.

At the current time two of my three technical indicators are bullish.

Soybean:

Weekly export sales for soybeans came in at roughly 27.4 million bushels which was well above the top end of trade guesses.  This inspired some buying which in turn took the market high enough to trigger some additional technical buying.  As you can see on the following chart we are currently running well ahead of the pace needed to achieve the USDA projections.

We have a fresh set of South American numbers to play with as CONAB released a report this morning which places the 2015 Brazil soybean crop near 94.6 MMT, down from the 95.9 MMT they were estimating in January.  This was pretty much in line with the 94.5 MMT the USDA gave us earlier this week.  In Argentina the Rosario Grains Exchange is pegging the crop at 58.8 MMT, this is up from their earlier projection of 54.5 MMT as well as being sharply higher than the recent USDA number of 56 MMT.

In looking through the USDA Baseline report that was released yesterday I found it interesting that, according to the USDA, China’s soybean imports now account for about 64 percent of world soybean trade.  As you can see in the following chart, the projections are that this Chinese demand will continue to grow over the course of the next decade.

All three of my technical indicators are currently bullish. 

Wheat:

Weekly export sales for wheat came in at 15 million bushels which was within the range of trade guesses.

News that Russia and Ukraine have reached an agreement was viewed as negative to wheat prices as it would seem to open the door for rapid shipments of wheat out of the Black Sea region.

Finally, it appears that the weather forecast has reduced some of the cold temperatures forecast for the US plains and added some moisture.  Again, this was not supportive to prices.  At the end of the day we are currently looking at ample world supplies and not good bull story which should keep wheat prices struggling.

In spite of today’s lower close all three of my technical indicators are currently bullish both the Minneapolis and Kansas City March futures.