Grain Market Chatter Closing Comments 02/19/2015

Craig’s Closing Comments

February 19, 2015

Extreme violence in Libya is starting to be more cause for concern. Recent reports are saying gunmen assaulted a U.S.-Libyan oil field. There's also talk that a terrorist blast has adversely impacted the largest oil field in their country. Recent data shows Libya’s production level fell to about 325,000 barrels a day in January down from almost 900,000 barrels just three months earlier.  The conventional wisdom seems to be that we have not yet seen the lows in crude oil prices.  They may be correct but as the above would seem to indicate, we are only an Allah Akbar and a few explosions away from a very different playing field as it relates to crude oil.

Corn:

Traders seemed to be hanging on every number that came out of the USDA Farm Forum today and I suppose that will be the case tomorrow as well.  The first thing that we saw coming from them this morning was the planting projections.  That shook out as follows:

It is interesting to note that they expect crop acres and CRP to be down 4.7 million acres from last year to stand at the lowest number since 2010.

We had the weekly ethanol report today and it continues to show good weekly demand.  Last week we ground up 101.22 million bushels to produce ethanol. To achieve the USDA projected usage we need to grind an average of 101.658 million bushels per week so we were slightly off of that mark last week although it was a very strong number.  When we look at the profitability of ethanol plants some folks are wondering how long this strong grind will continue.  As you can see on the following chart, ethanol plants in Iowa are currently losing money so may be reluctant to keep grinding as aggressively as they have been.

The news we are hearing coming out of Argentine seems to indicate that the corn crop is coming in above expectations.  Some analysts are now projecting a 25-26 MMT crop, a significant increase from the 23 MMT recently posted by the USDA.  If the crop does turn out to be that large it could put the USA corn export forecast at risk.

Finally, it should be noted that the funds were buyers of 6,000 contracts of corn futures during today’s session.

At the current time all three of my technical indicators are bullish although it certainly appears that we are in a sideways trading range market at the current time.

Soybean:

In November voters in the District of Columbia’s passed voter Initiative 71, which legalized the cultivation, possession and use of marijuana in the nation’s capital, and the new law is set to take effect next week.  The reason that I mention this is that there seemed to be evidence today that government officials were already imbibing in the herb.  Officials at today’s USDA Ag Forum bucked the private analysts and traders who, on average, expected a planted acres number of 88 million planted acres to be released.  In fact, today’s number of 83.5 was actually a decrease from last year’s number of 83.7 million planted acres.  This surprisingly low acreage number provided a boost to the market today and maintained the higher levels right into the close. 

Another factor that seemed to be driving the bean complex today were spread traders that were buying soybean meal and selling soybean oil.  This ended up being supportive to the bean market as well.   In fact we saw the funds buy roughly 10,000 contracts of soybeans during today’s session. 

News out of South America was seen as somewhat supportive today.  We are seeing a few harvest delays due to rain in Brazil but at this point it is minor with 11% of the crop now harvested, slightly behind the average pace of 15% for this point in the year.

Labor disputes in Brazil proved somewhat supportive today as well with talk that Mato Grosso truckers may indefinitely block traffic to key Brazilian ports if their demands are not met by Friday.

All three of my technical indicators are currently bullish.

Wheat:

Probably the biggest punch to the gut came from Egypt.  As you may remember we (USA) had given them a 100 million dollar line of credit to buy wheat.  It has been assumed that this would push some of that export business our way but today they ignored us completely and 240,000 tons of French and Romanian wheat. 

Funds seemed to take the other side as they bought 2,000 contracts of wheat during today’s session.

At the present time two of my three technical indicators are bearish both the Minneapolis and Kansas City March futures.