Craig’s Closing Comments
February 20, 2015
Yesterday I wrote about the drop in oil production in Libya so it is only fair to give another side of the energy story as well. That story is that here in the USA the oil stocks continue to grow. The latest report for the US Energy Information Administration (EIA) shows US crude stockpiles hit a new record level for the sixth straight week in a row. For the week crude inventories rose 7.7 million barrels to a total of 425.6 million barrels. The analysts were looking for an increase more in the 220 million barrel range so this was pretty negative to crude oil prices. Looking at total gasoline inventories I see that they increased by 500,000 barrels last week and continue to be in the upper end of the five-year average range.
Corn:
Weekly exports and the Farm Forum numbers were the market drivers at play in the market today.
The Farm Forum took the first shot at projecting 2015/16 carry-out numbers. You can see their assumptions and projections on the following chart but the bottom line is that they are projecting a 1.687 billion bushels carry-out for that year and a continuation of the low price environment.
The weekly export sales numbers were out today and they came in near the top end of the range of trade guesses at 36.7 million bushels. I thought that was a pretty good number in the face of the stiff export competition that we are facing from countries such as Ukraine.
At the current time two of my three technical indicators are bullish although it certainly appears that we are in a sideways trading range market at the current time. In fact if this chart was an EKG we would be pulling the sheet over the patients face. Keep an eye on this next week. If we close below the 100 day moving average (red line on the bar chart) it could trigger additional selling pressure.
Soybean:
The Farm Forum was on center stage as far as the bean market was concerned today. The big shock to the market came yesterday when they projected that farmers in the USA will plant 83.5 million acres of beans this spring. That drove prices higher yesterday but today they put some additional demand and supply framework around that acreage projection and suddenly the future looks dim again. You can see their assumptions on the following chart but the bottom line is that they are projecting a carry-out for 2015-16 of 430 million bushels and if that were to materialize the end result would be prices probably a bit lower than current levels.
Weekly export sales were within the range of trade estimates and at 18.6 million bushels seemed to point to the export business making the shift from our shores to South America.
Speaking of South America, there is a little unrest down there right now with Brazilian truckers blocking roads in protest of high diesel prices. This appears to be slowing harvest activity. Harvest has also been slowed by rain but weather conditions are expected to improve, which should allow harvest activity to increase next week.
Two of my three technical indicators are currently bullish, with the stochastics now having tipped into bear mode.
Wheat:
Wheat struggled today as poor export demand and an ample domestic and world supply weighed prices down.
Weekly exports came in at a disappointing 9.8 million bushels. The bulk of that was actually spring wheat with SRW showing net cancellations for the week.
It was interesting to see the winter wheat crop ratings. We have heard a great deal of talk about winter kill, drought, etc. and that may turn out to be significant stories at some point but right now hard red winter wheat in Kansas, Nebraska, Oklahoma and Texas is rated near 45% good to excellent versus 32% that was rated good to excellent at this point last year.
The Farm Forum didn’t offer much new to the conversation but reflects an increasing stocks number year over year. The details are in the following table.
At the present time two of my three technical indicators are bearish both the Minneapolis and Kansas City March futures. It should be noted that the March Kansas City futures set a new life of contract low today.
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