by Duane Lowry
Monday, April 30, 2012
Corn= mixed/vulnerable, Wheat= lower, Soybeans= lower.
*At 6:35 am> Night session results: Corn= 1 higher July, 1 1/2 lower Dec, Wheat= 7 1/2 lower, Soybeans= 5 1/4 lower July, 1 1/2 lower Nov.
*Where are we for the MONTH? July Wheat= down 24 cents; July Corn= down 17 3/4 cents; Dec Corn= down 1 1/2 cents; July Soybeans= up 85 1/4 cents; Nov Soybeans= up 4 cents; July Soymeal= up $38.70; July Soyoil= up 2 points; Crude Oil= up $1.39; US $ Index= down 38; Gold= down $7.10; Dow Index= up 22.
Weather offers near perfect conditions/forecasts for the US Midwest and Plains. Moisture and warmth for crops already planted, planting windows for those corn acres remaining to be planted. Global concerns are limited.
Wheat will start lower on overnight weakness. Some traders may expect this afternoon's crop ratings to show a small deterioration, but even if this is the case, ratings will still be well above normal. All that said, US wheat production potential remains very high and weather conditions/forecasts remain favorable/non-threatening, as do much of the Northern Hemisphere wheat crops. Short-term technical conditions suggest limited upside potential above Friday's highs. We may experience some choppy trade this week, as wheat traders take a cautious approach watching corn to see how long the May squeeze play lasts, but if corn shows signs of stalling out, there may be more confidence develop in selling wheat as the week unfolds. Overall conditions warn of potential for declining price trends into and maybe through the US wheat harvest. If true, downside risk from current values could still very easily be $1.
Corn will find many anxious to build upside excitement after Friday's strong old-crop price rally. Yet, anyone with experience in this business has to be concerned that Friday's announcement of a large sale to China is likely a sign that these announcements are nearly over. Thus, the marketplace has already digested all this information. And while we did get the widely anticipated announcement Friday, should we be more impressed with the sharp old-crop gains Friday, or should we be more troubled by the fact that old-crop corn futures managed to be within a dime of the lowest values in 13 months just 24 hours before the announcement? The point here is that for several months the corn market has underperformed popular expectations, including the weakening of the old/new inverses. So, despite July corn being up 18 cents Friday and Dec only up 4 cents, the old/new inverse still only recovered about half of what was lost during April. The point here is that it may be more important to focus on corn's much weaker than popularly expected performance, rather than on Friday's recovery effort. As for new-crop futures, they too have underperformed popular expectations and appear likely to continue to feel the weight of a very favorable start to the 2012 growing season. December futures are currently in the bottom 20% of the trading parameters established during 2012. December futures are currently in the bottom 10% of the trading parameter in place since September. Yet, there is a very real possibility that current prices could ultimately be labeled as being in the top 30% of this year's trading range! How, you ask? IF December futures happen to ultimately have downside risk to $4 by harvest, which is not at all an unreasonable possibility, then today's approximately $5.40 futures suddenly falls in the top 30% of the year and not the bottom 20% as it is to-date. For producers, this is the dilemma that they must address. We have large acreage, we have a very favorable start in nearly all areas, and we have global wheat price structures that appear poised to remain an anchor to corn prices. And, all this is unfolding at a time when the US producer has minimal new-crop price protection and the speculative community is still long. If we don't find a notable production threat, this one-sided market approach where producers don't have price protection and the speculative community is long, will face a serious and price disastrous day of reckoning.
Soybeans will start lower on overnight weakness, initially driven by surprisingly large deliveries against May futures. This occurs at the same time that the C-O-T data released Friday afternoon shows record speculative length in soybean futures. Soybean planting is still in its infancy stage, but this is due to the calendar not any reflection of conditions. While strictly anecdotal, it still appears to me that our final soybean acreage will be notably higher than USDA's March 30 projection. Overall conditions/forecasts suggest we should expect a very favorable start to the 2012 growing season. Technical conditions have old-crop futures in exhaustive mode, as short-cleansing has been very thorough during the past few/several days. New-crop futures have struggled to participate on this last price surge, with November futures Friday settling 35 cents below the peak made in the early days of April. Overall technical conditions continue to warn of significant downside risk. Fundamental conditions don't seem nearly bullish enough to me to warrant sustaining current prices. There will be no shortage of old-crop US soybeans and US soybean acreage will prove to be enough above the March 30 projections that a favorable yield scenario will greatly call into question the need to maintain $13.50 new-crop futures, especially if corn values are eroding. So, producers need to aggressively seek ways to protect current profits. If you need a current example of why you should seek to protect profits, just consider that new-crop corn futures are currently in the bottom 20% of this year's trading range and in the bottom 10% of price parameters since September. Especially if you consider this has transpired while trader sentiment has been nearly universally bullish throughout the entire stated periods, not to mention the fact that conditions may be unfolding that could warrant still lower prices. So, again, recognize the significance of profits offered for new-crop soybeans.
In summary, weather is favorable/non-threatening and forecasts offer no serious threat of an adverse change ahead. Excitement about Friday's old-crop performances in corn and soybeans will certainly influence and fuel what has been and continues to be the default setting of being bullish. Yet, there is an exhaustive tone to both old-crop corn and soybean price moves and possibly questionable fundamental merit. New-crop fundamental outlooks are much different and may prove to be a more overall influence on price trends ahead than any near-term old-crop storyline. Until/unless a weather problem develops, downside risk will remain very significant. At 6:21 this morning: Crude was down $0.60, Gold was down $1.90, Dow Index was down 5 and the US $ was up 12.
Barge Values: April= +62 K
CN: Support= 5.85, Resistance= 6.25-30
CZ: Support= 5.15, Resistance= 5.40-42
**PROFILE: July Corn> Current strength is nothing but a corrective bounce, not a new up trend. Dec Corn> Selling interest should continue to build above the market from multiple sectors of the trade and limited short-term corrective strength potential. We remain poised for declining prices in the weeks ahead. It may be a very precipitous decline. The downside breakout area was basically $5.50. When considering where prices could be headed to the downside, current new-crop prices still offer legitimate/warranted hedging opportunities. Downside risk remains significant.
Barge Values: April= +63 K
SX: Support= 13.00, Resistance= 13.65-75
SMN: Support= 400, Resistance= 430
BON: Support= 54.00, Resistance= 56.00
**PROFILE: Nov Soybeans>. IN SUMMARY, producers need to be aggressively protecting profit opportunities. What the soybean market has been experiencing is not much different than what corn experienced in August of last year. Corn declined roughly $2 per bushel at a time when production estimates continued to decline and trader sentiment was not at all expecting a break.
Barge SRW Values: April= +58 K
WN: Support= 6.05, Resistance= 6.45-50
**PROFILE: Chicago July Wheat> Resistance around $6.50 should limit short-term corrective strength. Overall conditions point to eventual price erosion below recent low.
GLOBAL HIGHLIGHTS & HEADLINES:.
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