2/26/18

Morning Bullet Points - 02/26/2018

GOOD MORNING—

MARKET HIGHLIGHTS

  • Markets trading mostly higher overnight on dryness in Argentina and dryness in US HRW areas.
  • Friday’s commitment of traders report showed net buying in corn/soybeans, while they sold wheat.  Managed funds were net buyers of 29,000 corn to put them net long 18,600 contracts which is the first they have been long since last summer, they bought 57k,000 soybeans to push the net long to 99,000, and they sold 11,000 wheat to push the short back out to 67,000 contracts.
  • Friday’s USDA outlook numbers were lacking of any major surprises with corn/soybean acres slightly lower than a year ago.
  • Argentine corn/soybean production estimates dropping.  The USDA had their corn at 39 MMT and beans 54 MMT last month.  Some now estimating corn in the mid-30’s and soybeans sub-50.
  • On the flip side, Agroconsult estimated Brazil bean production at 117.5mmt vs. the USDA currently at 112mmt.
  • Corn continues to trend higher with big resistance above the market near 3.78 basis May and 4.00 basis Dec.  Support below the market at 3.72 May and 3.93 Dec.
  • Soybeans broke out of their range to the upside last week with upside resistance at 10.80 basis May and Nov.  Support below the market at 10.30.
  • Wheat working back to the upper end of its consolidation zone after the recent pullback.  Support 4.65 for May and resistance 4.80.
  • USDA reported 132,000 MT of soybeans to China for 2017/18.
  • USDA reported 125,000 MT of corn to unknown for 2017/18.

WEATHER   

  • Argentina caught very limited rains over the weekend with a dry outlook seen for the dry areas over the next couple of weeks.
  • Brazil continues to catch scattered rains, which is helping beans finish out.
  • US wheat areas are dry over the next couple of weeks.

OUTLOOK

  • Corn is starting to take out the new crop offers that are resting around the 4.00 area.  It seems likely the market will take that level out, but then buying could be exhausted for a bit.  Regardless, the South American crops are getting smaller, US demand is improving, and the market needs to incentivize a big US corn crop even though stocks are more than adequate for now.  Look for pullbacks to be supported.
  • Soybeans broke out to the upside last week.  The market is pretty overbought with a lot of speculative length.  Look for a pullback to the 10.30 area in May to buy, but there looks to be more upside for now.
  • Wheat had a healthy correction and rallied overnight on weather concerns.  The managed fund position is short.  Look for the market to work higher over time.

Fun Fact of the Day: The largest country with no border-access to the open ocean is Kazakhstan, which has an area of 2,724,900 km² (1,052,100 mile²) and is bordered by Russia, China, Kyrgystan, Uzbekistan, Turkmenistan, and the landlocked Caspian Sea.

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