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Futures Cash Info Evening Commentary for 3-31-15

 

FUTURES CASH INFO, LLC.

Corn: Much to the surprise of many analysts, the USDA acreage came out higher than average guesses. For corn, the prospective planting report showed farmers as of March 1st intended to plant 89.199 million acres. This is quite close to the Ag Outlook Forum forecast and was 468 million acres over the average trade guess. As one contact indicated, “if, the farmers gave the USDA an 89 million acreage number on March 1st and the price of corn has rallied since then, are we now at 90 million acres?”

March 1st corn stocks indicated farmers were holding more corn in bins with stocks estimated at 7.745 billion bushels versus trade expectations of 7.609 billion bushels and speaks to a potential carryout of 1.666 billion bushels rather than 1.606 billion bushels assuming the yield given at the Ag Outlook Forum. On-farm stocks were pegged at 4.38 billion bushels which is up 519.5 million bushels. That said, next week’s report will be watched for feed usage to be ratcheted back or, was last year’s crop production understated due to the increase in the stocks number 136 million bushels higher than trade expectations? With a 164 bpa, ending stocks could be closer to 1.596 billion bushels versus the 1.777 billion bushels this year. We should take note, at a yield of 160 bpa, corn stocks could decline to 1.247 billion bushels regardless of the third highest yield on record! Looks to me like weather will be key this summer. Hmmm, Farmers’ Almanac forecast?

The corn market had rallied back towards the highs of the past month and basically, the trade and public was tilted bullish. Thus, the harder fall on the news. Usually, it is the stocks that moves the market the most but today, I suspect acres had more to do with it today.

Farmer cash sales were quiet and there seems to be good demand for cash corn in the countryside.

Funds were net sellers of 20,000 contracts of corn.

Bottom line, Dec corn is now into a weather market. The Delta and southern Midwest states are important but more important will be the three “I” states of Iowa, Illinois, and Indiana.

I remain suspect of corn rallies until we are into May and could be early June. The cycle windows will be our focus at that time. Closing underneath the $4 level will cause traders to be intense.

North Dakota showed a marked increase in sunflowers and barley versus corn. That should be no surprise what with producers dealing with rail issues of a year ago.

This afternoon, CIF Gulf corn basis values were higher today, with exporters paying premiums for afloat barges and those loading this week. March-loaded corn barges traded at +62 basis May and +63 basis May, while, barges loading this week traded at +61 basis May.

For tonight and tomorrow, May corn resistance is 391 and 406 with support at 368 and 360.

Dec corn resistance is 415 and 428 with support at 394 and 386.

On the brighter side, (yes, the glass is half full) I tend to view a break in corn values as pulling the market backwards to allow for a summer weather concern. This will allow those who have made cash sales to replace those sales or those who have not sold but want to be able to take advantage of any rally this summer can do so with buying call spreads. For now, the Dec 440 calls long and selling the $5 calls is becoming cheaper. I call this insurance and not to sound redundant, I view 2016 as a better priced year with this year forming the base?

Soybean acreage was estimated today a bit over our estimate of 84 million acres but still closer to the Ag Outlook Forum estimate of 83.5 Million acres with today’s number coming out at 84.635 million acres which was up just shy of a million acres from last year’s 83.7 million. Still, this shocked the trade as the average guess was 85.919 million acres. So, compared to trade guesses the planting intentions were down 1.29 million acres which equates to 58 million bushels.

The USDA found 22 million more bushels of soybeans and last year in this report, the USDA found 39 million more bushels. Still, the March 1st stocks were down 12 million bushels from the average trade estimate at 1.334 billion bushels. Assuming the yield and demand is similar to the Ag Outlook Forum, the implication is 2015/16 carryout is 478.7 million bushels versus 537.8 million bushels implied by the trade.

In less than 5 minutes of release, soybeans marked a new 5 month low and a new one week high. Funds were net buyers of 6,000 contracts of soybeans, buyers of 3,000 soymeal, and ended the day even in soyoil.

Bottom line, traders sought to sell the first sharp reaction of the report with their focus on large South American production and recent talk of increased acres of soybeans in Canada. The next 15 day forecast will be watched intently as the 15th of April seems to be a line in the sand by the trade as a switch to soybeans versus corn acres in the Delta and southern Midwest states. That said, the USDA estimated cotton acres to be much less than the trade was thinking at 9.549 million acres which is down 280 million acres from the average trade guess and down 1.552 million acres from last year.

Futures vacillated all day but where will prices be in a month? I suspect lower. For now, a Stevedores strike may be another opportunity to rally soy prices. That said, exports are nearly 100% of the USDA estimate for 2014/15 and in the face of a rallying Dollar. Cancellations have been pretty non-existent by China as they continue to load out soybeans as fast as they can even in the face of a record SA production. I suspect Argentine farmer holding of 7.4 MMT of last year’s soybeans versus a normal 3.4 MMT along with China’s push to move more towards food security and safety rather than pushing for more production of grain may be the reasons? “Buy today as it gets more expensive tomorrow?”

All that said, we also need to note, the stocks on-farms were estimated to be huge at 609.2 million bushels which is up 227.3 million from last year.

CIF Gulf basis on soybeans for nearby bids slipped a few more cents on what was said to be slowing demand. March and first half of April were down 1-2 cents from this morning at +73 basis May.

May soybeans have resistance at 986 and 998 with support at 956 and 938.

Nov soybeans resistance is 966 and 978 with support at 938 and 923.

It is hard to be a bull in soybeans what with all the supply coming in the Western Hemisphere. So, a weather market may be key but on the good side, Chinese demand remains stellar and the food safety measures along with possible rebuilding of soybean reserves may spell continued good demand. All that said, I wonder just how much bigger Brazilian production will become what with concerns over continuous soybeans and concerns on clearing too much rain forest. I should also add, perhaps the pressure on the larger farmers paying interest and inputs in Dollars as well as, selling in Dollars versus the smaller farmer selling in Dollars and buying inputs in Reals? The larger Brazilian farmer may be feeling the same pain as the US farmer.

Wheat: All wheat acres came out a bit less than traders anticipated at 55.367 million acres versus trade estimate of 55.8 million acres on average. The tighter acreage number in the face of very dry conditions in the HRW areas should allow for wheat to vacillate in value. Traders had counted on more Spring wheat acres and that just did not happen. Spring wheat acres were estimated at 12.969 million acres versus traders average guess of 13.119 and I suspect sunflowers and barley gained the difference.

Like corn and soybeans, March 1st stocks grew to 1.124 billion bushels and that too, was less than trade average guess of 1.140 billion bushels.

April 6th will see the USDA release their first all wheat crop condition ratings which should see good SRW ratings due to consistent rains and slipping HRW ratings due to dryness.

Bottom line, wheat speculators are holding a very large short position and a further enhanced dryness on HRW and wetter conditions on the SRW should support the market as we go down the road.

More concerning is the weather turning much kinder in Ukraine and Russia where rains are said to be picking up.

Cattle: Feeder cattle surprised me today with a feeble rally in the face of a bearish corn report. Still, with both fats and feeders moving in a seasonal slip into Wednesday the market seems to be taking its sweet time. Today’s range on May feeders was an inside day. Tomorrow will be key and while a new low is expected from today, tomorrow could be a day of surprise.

The boxed beef is now within $10 of the highs and movement was 86 boxes with 29 trim. Still, the choice was up $2.43 at $254.13 with the select beef up $1.02 at $248.64.

Supplies are tight and these may be the tightest supplies that we are looking at. I suspect that the start to an earlier grilling season is supporting the beef but that said, demand is said to be slow?

Bottom line, while futures did little today, I continue to look for a low tomorrow or Thursday and then higher on Monday through next Wednesday of next week. Keep in mind, the cycle window is April 8th and that is also evident on soybeans, corn, and wheat, S&Ps, crude oil, and the Dollar.

Have a great evening!!!!

 

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