PROFIT TAKING................... Well, with three
government reports in the last 30 days, we now won't have the
influence of any pending USDA report until May 10 or a month
away. That means that other than weather's impact on planting
progress were in a gray area where grains chew on the old news
for support while planting progress weighs on strength. Once were
35 to 40% planted the crop condition report for corn and
beans will come out and weather's impact on emergence becomes 90%
of our pricing influence. So how's planting going. No beans were
reported as of April, 9 but corn came in at 7% seeded versus the
10 year average of 3%. Traders had expected 15%. Reason were
ahead of pace is the generally warmer and drier than normal
weather across the Midwest grain belt where 85% of our corn and
beans call home. The slower than expected pace is the results of
the government crop insurance program that if signed up for
states you can't plant until after certain dates that vary from
state to state. The states in the upper quarter like North
Dakota, Minnesota, Wisconsin and Michigan plant later as frost
and freeze can occur into the end of the April. States
south of Illinois, Indiana and Ohio or the Southern Delta plant
earliest as they are out of harms way on whether first. 90%
of the state's planting date restrictions pass by April 21, so
expect a fast pace of planting after that, weather permitting. As
expected states over the 7% national average are Kentucky 32%,
North Carolina. 25, Tennessee 46 and Texas 52%. Furthest behind
were Michigan 3%, Wisconsin zero, South Dakota two, North Dakota
zero, and Minnesota 2%. Monday's crop condition report showed an
improving winter wheat crop at 61% good to excellent up 3% from
the week prior and 32% over last year's disaster. Soft red winter
wheat states Illinois were 84%, Indiana 83 and Ohio. 50% good to
excellent. Recent frost and freeze scares had little effect on
the soft red winter wheat as it is in the greening up stage with
no head or kernels to be damaged while early planted spring wheat
in the upper Plains has yet to emerge. The hard red winter wheat
in the Southwest saw good gains with number one wheat producers
state Kansas at 65% good to excellent up 5% on the week. Oklahoma
77% up 2 and Colorado 42%, up 1. Texas at 38%, up 4%. Though
Texas is dragging its feet, it's much improved over last year's
drought. WXRISK.COM sees two rain events the next
five days in those states, looking to further improve wheat
ratings. With demand for wheat slow, a rally on its own has to
come from a production problem here in the US, who is the world's
number-one producer exporter. At least near-term production looks
on the upside on improving quality. Tuesday's crop report was in
line with expectations and no surprises. Corn ending stocks were
801 million bushels, unchanged from the month prior. Traders had
expected it about 80 m.b. lower but it's still a historically low
number putting almost unrealistic growing season weather results
needed to improve inventories to safe levels next year. World
stocks fell to 122 m.m.t. and a stocks to use ratio the lowest
since 1973. Any weather problem with the new crop and old crop
demand will jump sharply as importers buy coverage as insurance.
Bean carryover was put at 250 million bushels, down 25 from last
month, but over pre-report estimates. This led to a higher
opening but a lower close as buy the rumor, sell the fact made
its play. Since South American countries tally production as
harvest comes in and test weights and such are implemented and
harvest continues through to months end in Argentina, Paraguay
and Brazil traders will expect further cuts in the May USDA
report. This past report cut 4 million metric tons in South
America with overall production, down 17 million metric
tons over the year prior. Wheat carryover was put at 793 m.b.
down 32 from last month largely on wheat to feed usage increases.
It's simple. The break in wheat prices and corn strength has
wheat at a 1.3% discount to corn versus a five-year average of
a 41% premium to corn. Asian markets more concerned about
quantity and value over quality are buying up all the low-quality
feed wheat. Okay, turn the page. On my last report, last Thursday
I gave the reason why we should expect a breaking in prices after
the report. One, funds take profits after reports to pay bonuses
on profits taken before a month ends. Two, looking forward, we
wouldn't have another perceived bullish crop report for a month.
Three, we now face a negative mindset that comes off planting
progress. Four, the last two years saw measurable breaks after
the April report with last year's corn drop over $.50
and beans $.80. As of Wednesday's close corn broke $.34 off the
Monday pre-report high, beans $.40 off its Monday high and wheat
$.29 lower. We expect to find a near-term post report low before
the month ends to be bought and hold long for new highs in the
growing season as large trading funds will build their weather
premium rally into the market. Last year corn saw a post
April report low lead to a weather premium high of a 1.10
by mid-June. Beans saw a 1.20 rally. Funds have a yearly
cycle, they follow. This year cycle sets up very strong due to
extremely tight corn and bean ending stocks. Weekly export sales
Thursday shows 959 t.m.t. of corn was sold last week up 2% from
the week prior. This was better than the trade had expected as
importers usually back off ahead of the USDA crop report
such as this week. Mexico continues to replenish drought drained
reserves with US corn at 295 t.m.t. versus 267 last week, and
China 60 t.m.t. versus 394 the week prior. Bean sales were at 460
thousand metric tons, up 13% from the week prior. China was in
for 134 old crop year and 170 new crop year. Also the USDA
announced new sales to China that will show up on next week's
report of 630 t.m.t. old and new crop . After three down
days in corn and beans Thursday rebounded with gains off
the overall bullish export news and Friday we started off
sharply lower. Long-term weather forecasts for the end of April
early May are setting up hotter and drier conditions.
So a low needs to be found near-term to buy as May should
see a weather premium start to build. The post-April 10 report
low will hold through August 1. Technicals read like this.
Entering Friday, May corn first support is 6.26 then
worst-case downside scenario 6.10. May bean support is
14.1. then 13.90.. May wheat support is 6.14 then 5.98.