Market Monitor : Volatile week before USDA report


The time is rapidly approaching when one of the most significant events of the marketing calendar will be behind us. That would be the Monday, March 31, USDA Planting Intentions Report.

It stands as the benchmark to start the marketing year, with a line drawn in the sand that tells us what we likely will have for corn and soybeans acres for the 2014 growing year.

Jockeying for position

Traders will spend this week getting positioned for the coming report. So far that seems to mean that prices are higher as we get back the losses we took the end of last week.

Monday was a big day on the Chicago Board of Trade, as May corn futures were up 11 cents, and made a 4.91 high before closing at 4.90. This represented a huge gain from the recent low of 4.53 1/2 on Feb. 28.

Soybeans had a wild ride Monday as the May contract gained over 16 cents, and had a range of almost 40 cents. The high was 14.32 3/4, but that was not even close to the recent high of 14.60 on the 7th.

We have had three highs of note. Besides the one on the 7th, we hit 14.56 1/4 on the 10th, and we got up to 14.56 1/2 on the 20th.

The May wheat has had the most consistent chart. There, the uptrend has continued since the end of January. In that time, we have gained $1.70 to a high of 7.23 1/2 on the 20th. After a bad retracement a couple of days, we were back to a high of 7.18 1/4 briefly Monday. The close was 7.14/1/2, up 21 1/4.

As we look at the sharp price adjustment Monday, we look for reasons for the rebounds. The USDA report may be a big factor, but there are others.

Who’s planting what?

First, let’s look at the acreage possibilities. Corn acres are expected to drop, but just how big the drop is remains the real question.

One large advisory service expects 5 percent fewer corn acres, at 92 million. Our own CHS Hedging advisors are at an extreme, going for 90.5 million. The average trade guess is 93 million acres.

Whatever the corn acres, the decline is bullish to the prices. If the change is modest, the acres are already “in the market.” If it is at the low end, prices are still too low.

Much of the acreage change comes as the ethanol boom has stopped. Farmers are anxious to get back to historical corn/bean planting ratios. Those have been disrupted the last few years by the demand to produce over 5 billion of our bushels for the ethanol industry.

It should be mentioned that ethanol producers are having a good time right now, with prices at or near the historical highs for ethanol, but corn prices modest. The ethanol is mostly supported by the price of crude oil, which is now over $100 per barrel.

If the corn acres go to beans, the trade looks for as much as an 8 percent gain in acres, to 82 or 83 million. The average guess is 81.1 million. The last USDA numbers were for 79.5 million.

Once again, a modest change is already In the market. A bigger gain is bearish to prices.

Soybean prices have been supported by the idea that the South American crop was getting smaller, and that we would be tight in supply for the summer. At one point, the Brazilian crop was expected to be a record and then some. They increased acres by 9 percent. However, there have been production problems that have knocked that back.

In the north, harvest is finally back to 70 percent after severe rain delays. The rains have hurt yields a little. In the south, two droughts have dropped the yields by 30 percent. History will record that this is not the year that Brazil passes the U.S. in soybean production. It was expected to, but the weather problems have changed that expectation.

The Brazilians say, “Wait ’til next year!”

Meanwhile, the wheat crop is being hurt by dry weather in the Plains. At the same time the price is being supported by production problems, the Bear is causing more trouble in Ukraine. Not only does the Bear crap in the woods, he does it more than once.

We are seeing selling opportunities. They may be best before the report, or just after. Nothing in the report means really high prices, just a one-cay adjustment.


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