Grain Market Chatter Closing Comments 02/25/2015

Craig’s Closing Comments

February 25, 2015

Corn:

Corn is interesting in that it is believed that the American farmer has a record amount of corn still in their bins that will eventually come to town.  At the same time we are seeing lower prices being offered in the export market by both Argentina and Ukraine and the rumor is that Russia may soon join the export market.  Finally, the conventional wisdom is that March 1 stocks report is going to show a larger number than last month’s projection.  Part of the reason for that thought was on display in today’s weekly ethanol report where we saw the weekly grind dip down to 99.435 million bushels, down from the 101.736 million that we need to average each week to reach the USDA’s projection.  With many ethanol plants now losing money we may see that grind pace slip which could result in a larger carry-out.

None of this is friendly but what puzzles me is that the funds are still net long the futures market.  I find myself wondering if the March report could trigger the funds into exiting their long position and in the process drive the market lower.  If so, I think it would be a short lived phenomenon and then we will start looking at acres, planting progress and weather here in the USA to drive price direction.

At the current time all three of my technical indicators are bearish.  Look for initial support in the May futures at roughly $3.75.

Soybean:

The bean market is being driven in large part by logistical issues in Brazil.  The trucker strike is now in its 7^th day and has been growing in strength.  It gained enough momentum that the fear of potential repercussions from the strike took the market sharply higher yesterday.  Today, for the most part, we traded under the assumption that the strike was soon to be a thing of the past but at about 2:30 this afternoon I got an alert that the Brazilian government and the striking truckers had failed to reach an agreement on freight rates and that the strike was going to continue.  Although export loading has not been slowed by the strike thus far, the fear is that the strike is slowing soybeans to the ports and is also slowing the delivery of fuel to the interior for harvest.

In the meantime harvest in Brazil continues and is estimated to be 20% complete which is just a couple of percent behind the normal pace for this point in the year.

Speaking of South America, the following link will take you to a USDA report on the situation in Argentina which is fascinating reading:

http://www.usda.gov/oce/forum/2015_Speeches/AWells.pdf

I think it is wise to keep in mind that a rally based on a logistical problem is generally not a rally that is going to be sustained for a very long period of time and probably should be viewed as an opportunity.

Two of my three technical indicators are currently bullish, with the stochastics currently tipped into bear mode.

Wheat:

The following chart was part of the Feb. 10 USDA report and really sums up the problem wheat is having.  The fact is that we have ample world supplies which results in a very competitive world wheat market and the premium that we are asking for USA wheat has been limiting our exports.  Pretty simple Econ 101 type of situation really and with the May Kansas City wheat making another life of contract low today and the Minneapolis wheat knocking on that same door I am not sure how low wheat can go but right now the picture is not pretty. 

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