The Grain Report

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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.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Commodities

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