Bullish Factors Emerging; Not Yet Impacting the Grains
Crude oil is higher, the $ lower and Dalian, China grain futures are up with the exception of bean oil, which ended a little lower, a bullish combination overall for our grain market.
The forecast for the Midwest is wetter than indicated yesterday with widespread rain between now and Saturday of up to 2.5" and coverage of roughly 70-75%. Given all this, one would expect a strong market this am but overnight prices were barely higher, just 2 1/2 better in beans with corn fractionally better and wheat fractionally lower. This surprisingly weak performance in the face of generally bullish news is surprising. Maybe the market knows something we don't.
The weekly crop progress report was mostly neutral with winter wheat declining 1% in the good to excellent catagories to 46%, as expected. Corn improved 2% to 59%, also as expected. Beans were just 1% better to 57%, a bit less than expected. Bean planting was slower than expected at 91% complete vs 96% average and emergence was only 82%vs 93% on average. Spring wheat improved to 72% good to excellent vs 67% last week, benefiting from ongoing favorable weather. Winter wheat harvesting remains slow, just 22% done vs 32% average. The wet weather that has delayed harvesting is forecast to remain in place the rest of the week, keeping harvest progress slow and increasing the risk of quality losses and disease. The USDA said 8% of Iowa's corn and 7% of Iowa's beans have been flooded. They also said 11% of Iowa's corn and 12% of Iowa's beans need replanting.
The Senate will resume hearings today on legislation to restrict speculation in the commodities markets, especially the energy sector. It is feared this could disrupt the functioning of the market, driving away liquidity by forcing trading overseas. The bulls fear a big sell off in prices as well.
In other news, Japan bought 152,000 tonnes of US wheat. Malaysian palm oil fell 55 ringgit today. No news out of Argentina this am but the strike seems to be winding down with beans moving to market. Of course, this situation could change again quickly so traders will keep watching for fresh developments. Argentina's wheat belt will be mostly dry the rest of this week and more rain will be needed there soon. Australia will see good rain chances in the west Fri-Sat but little rain is forecast for eastern wheat areas thenext several days. More rain is needed across all the Australian wheat areas soon or production prospects will suffer. StatsCanada estimated all wheat seeding at 25.1 million acres, in line with the trade ideas. Durum wheat acreage was put at 6.1 million vs the average guess of 5.9 million. Canola acreage was 15.8 million, 1 million acres more than expected. Oats was 4.4 million acres, just below the 4.6 million expected.
I would give the bears another chance today and stick with the short side. ---Vic Lespinasse
