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Corn futures have leaped to their highest level since September upon hearing of Russia’s military occupation of the CrimeanPeninsula in the southern Ukraine. Traders are worried that their actions could threaten grain exports from the Black Sea region. Several million tons of grain have been sold that are awaiting shipment. Ukraine is the world’s third largest shipper of corn. Meanwhile, it should be kept in mind that Crimea has closer cultural ties to Russia than the Ukraine. From an economic standpoint, neither country would gain from an escalation of the conflict. In other news, export inspections were a marketing year high at 41.1 MB. While sales are on track to reach USDA’s target of 1.6 BB, shipments are lagging by 90 MB. The trend following funds were a huge buyer of corn last week purchasing 290 MB. This puts them long 185 MB, their first long position since last June.
July corn rose to 492.25 on Wednesday followed by a one-day pullback to 483 Thursday. However, the setback was brief as the market turned up and traded to a new high at 496.25 in the recovery from 421.75. Resistance may develop at 498, but a more bullish pattern points to rising to 508 or 515-518. Cycle analysis shows that prices may not top until March 10th or March 18th. This would coincide with a seasonal time frame for a peak. For now, a decline below 483 must occur to break the short-term uptrend, while a sell-off below 468 is needed to verify that the recovery from the January low at 421.75 is done. Next week, the odds are even as to whether July futures will be higher or lower.
For the first time in a long time, soybeans gained support from corn and wheat this week. While a disruption in the Black Sea region would not ultimately affect soybeans, it could improve the prospects for U.S. shipments. In the meantime, the market continues to be supported from private sources in Brazil lowering their production estimates. USDA currently projects their crop at 90.0 million tons while some South American sources estimates are at 88.0 million. Export inspections were in line with estimates this week at 36.1 MB with China taking 22.5 MB or 62 percent of shipments. Currently, shipments are on track for 1.575 BB compared to USDA’s projection of 1.510 BB. The trend following funds continue to support the market as they bought 55 MB last week increasing their long position to 895 MB. This is the largest position they have held since September 2012 and will become unwieldy for the bulls to deal with when they liquidate.
July soybeans made a reversal in late February at 1416.75 that was followed by a swift and brief sell-off to 1352.75. A decline below this level is needed to turn the trend down and confirm a top. Otherwise, the chances are for a new high because if you will notice on the chart, higher lows are unfolding from 1352.75. This is one of the first things that a trader looks for to determine the direction of the trend. In addition, the trend indicators are currently pointed up pointing to the potential for a new high. In the event that 1416.75 is exceeded, look for a move upward to 1445-1455 with a top around March 10th-13th or March 18th. Next week, the odds are 80 percent that July soybeans will be higher.
Wheat benefited more than corn and soybeans from the crisis developing in the Ukraine this week with prices shooting up to their highest level since December. Ukraine is the fifth largest shipper of wheat. A disruption in shipments would certainly be felt throughout the world market and increase U.S. business. However, neither Russia nor the Ukraine would stand to gain anything in the event it happens. Inspections last week exceeded expectations at 22.4 MB. Currently, shipments are on track to reach and, possibly exceed USDA’s current projection of 1.175 BB. Since December, the trend following funds have been unwinding their short futures position and bought 80 MB last week reducing their shorts to 275 MB.
July wheat surged to 649.25 on Tuesday followed by a pullback 639.25. Prices rose to a new high on Thursday which projects a move upward to 662, 673 or possibly 693. Cycle analysis points to the market trading higher until March 12th-14th or March 26th. This is counter to the seasonal trend, which is down through the end of April. Longer-term, the recovery from the contract low at 557.25 may not end until May 21st. Next week, the odds are even as to whether July wheat will be higher or lower.
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Comments and suggestions are provided for information purposes only. Information contained herein is obtained from sources believed to be reliable but not guaranteed to its accuracy or completeness. Readers using the information contained herein are responsible for their own actions. No presentations can be made that recommendations will be profitable or that they will not result in losses. This information is neither an offer to sell nor solicitation to buy of the commodity futures mentioned herein. The writer may be trading in the commodities mentioned.