ONE DOWN, ONE TO GO
Well, our first crop report of the month came out. That leaves just one more, the March 30 planting intention report when farmer estimates show intended acres to be planted for corn, beans and spring wheat. Needless to say, new high prices for the month will be seen as the market trades the fear we won't plant enough acres of corn to build reserves and bean acres could come in lower - much lower - further diminishing ending stocks.
The fear factor is one of the most important pricing tools funds have. These funds rallied corn 40 cents into last week's monthly USDA crop report, beans $1.25 and wheat 50 cents, all on fears that the report would lower South American crop production, raise U.S. export projections, and lower ending stocks.
Here are the report day facts: they lowered production and left export projections and ending stocks unchanged. This has been the government's conservative reporting pattern since last spring. They only gave samples of the problems leading to lower production and yields each month during the spring planting flooding and July drought-like conditions...and now, South American production estimates and demand numbers are above what the trade expected.
It seems the government is trying to keep futures from going into in upward spiraling pattern creating even more food inflation in an election year, while they battle the unfavorable inflationary pattern of crude oil and gasoline prices. So, though we expect the funds to price in bullish fear heading towards the March 30 report, the consistent conservative reporting policy of USDA should lead to profit taking that will occur several days prior to its release.
Current news is a little more friendly for corn, with rumors of China buying up to 600 thousand metric tons of corn with a USDA announcement of 240 thousand sold to an unknown destination today. The trade believes unknown is China.
Monday, the Argentine government essentially suspended corn exports until early April. This was to closely look at this year's drought-stricken corn crop, to get a better idea of crop size in an effort to curb exports so they don't wind up short of corn for domestic use.
Several issues are arising out of this. One: Argentina may indefinitely suspend exports, setting up a sharply higher move in corn prices, since they are the number two world producer exporter. Two: it suggests they are getting farm reports that the crop is smaller than current estimates, which will support current prices and/or they will resume exports setting up a one-day drop in prices to offset Monday's 10-cent higher price off the news.
Technicals read like this. Support on May corn is $6.48 resistance $6.66 then $6.79 and up to $6.84. May bean support has resistance at $13.40 and again at $13.75. May wheat support is $6.40 and resistance is $6.70.
There is a substantial risk of loss in trading futures and options. Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. PFGBEST, its officers and directors may in the normal course of business have positions, which may or may not agree with the opinions expressed in this report.