Disappointing Week For Cattle, Good Corn Exports
This week’s grain trade was mostly corrective in nature. We had a good run higher and the markets were overbought, so we were due for a setback. The corn held on the best only losing about 9 cents this week. Expectations are for lower corn acreage (84.5 million), which is very supportive to the market and export demand for most of the past two months has been good. This week’s export sales were back over 1 MMT and with sales like that, one really has to wonder why the USDA lowered the export estimate in last month’s report.
We also have the quarterly stocks report out next week and I will be very curious to see those numbers. Ethanol production has been a little better than expected, so it will be interesting to see how much corn has disappeared in the past quarter. If we have less corn than expected we can expect to see improved demand numbers in the April supply and demand report.
The wheat didn’t fair too well this week. The huge winter storm that we are experiencing is expected to bring some much needed moisture in the HRW region. There has been a great deal of wind with the snow, so it is questionable how much good the snow will do the wheat. We shall see. It will be interesting to see if we have any changes in the drought monitor over the next few weeks. Acreage is expected to be lower in the wheat, but that is no surprise since we have already seen that in the Winter Wheat Seedings report, however we will have to look at the spring wheat acreage numbers to see if there is a reduction there as well.
The soybeans lost quite a bit of ground this week after a pretty strong start. Like the other markets the soybeans were overbought and due for a correction. There is also the fear of a large increase in acres which weighs on the market. The high trade guess calls for 81.5 million acres of soybeans, an increase of 5.8 million. That would be extremely bearish to the market if that happens and that is the biggest fear of the bulls right now.
Soybean export sales were good at 428,800 MT. We hear talk that suggests the Chinese demand is going to stop at any time, but it hasn’t happened yet. Another good thing is that soybean oil sales were a marketing year high and next week’s report should be very good too. An increase in crush would do a lot to help keep our stocks under control. Something interesting that I noticed in this week’s Commitment of Traders report was that the net long Index Fund position increased significantly in the corn, wheat, and soybeans this week. The Index fund in Kansas City wheat is the largest it has been since July. It is something we have to keep an eye on because some steady investment in the grains would provide some much needed support.
The key to next week will of course be the Prospective Plantings report. It will likely dictate direction until at least the April Supply and Demand report and probably longer. There is a good chance we will need more than 84.5 of corn and we definitely don’t need 81.5 million acres of soybeans, so it will be interesting to see what happens. Buying corn puts on Monday would be a good short term strategy, just in case the corn number is higher than expected. The wheat is headed for a test of the March low, but look for a recovery next week unless we have a disaster in the corn. The bull spreads are starting to correct in the soybeans, so look for a pull back there.
The cattle had another disappointing week, but what is new. There was a tiny bit of cash cattle trade at $83, so it looks like cattle feeders were going to wait until next week to do business. It was a little surprising that the cattle didn’t have a better reaction to the blizzard, but it is sort of like the wheat market. In the wheat we could use a crop disaster to control supply and the cattle market needs a blizzard to knock off some weight. The June LC are within 50 cents to a dollar of finding support, so being an aggressive seller here probably won’t pay well. However, we still have to look at strength as a selling opportunity.
