Grains Market Review On March 4th
Calls: Yesterday saw a mildly exciting upside move with beans and wheat extending gains while corn fights back for lost ground. Meal hammered oil due to a possible peace deal in Libya with crude backing off as profit taking was seen. Gold and silver took it on the chin with money moving into currencies again with talk of rate raises seen in the EU. On the fundamental side markets saw little but demand is present as seen in the CN-CZ spread and the SN-SX spreads. Both widened on the bull flat price move with interest in seeing SN-SX back above 80 in the near future. Bean demand from China and corn demand from Japan and Mexico are the relative catalysts there. I think the technical side of the trade remains bullish with positive stances seen in all indicators. No talk from weather with more information from Brazil pointing to increasing storms over Paranagua and Mato Grosso. This puts their second crop corn in jeopardy if coupled to the current harvest delays. The window is minimal so their time is short. The overall feeling was one of apathy with the upside move being that no new price ground was discovered. It needs to break above $7.44 in CK, 1402 in SK and 840 in WK to get any real excitement...sadly. Things are a bit stuck right now and the trade is waiting for more information out of Brazil or the Delta before making their next big move and I do not blame them. I see so much right on the horizon let's simply add a bit of risk premium back into the market and see what weather does with harvest in the south and planting here. Heading into the afternoon there was little fresh information to help change the bias heading into the night session. The overnight session opened sluggishly lower on minimal volume but that was countered with a story coming out of Argentina that their tax agency has suspended Cargill, ADM and Toepfer from the ONCCA export tax exemption. This would raise their tax burden from 2% to 15%. The same agency is limiting the number of export licenses granted from now on. This will force more origination to US shores in coming weeks if coupled with the weather problems in Brazil. This supports a widening of SN-SX. The whole agricultural complex closed at or near highs with bean oil showing good strength against meal today reversing yesterday's beating. KC and Minni backed off slightly on profit taking from recent contract highs. Bull spreads won overnight and look to continue winning throughout the day session. Heading into Friday markets have support from crude, the USD, cotton, sugar (modestly) and technical momentum. There is no overt excitement so look for another choppy higher session lacking a smoking gun unless something erupts in the Middle East heading into the weekend .The bullish bias remains intact heading into the heart of March.
Beans are called 6-8 Higher looking to get above the small consolidation range sitting between 1418-1422 with momentum in favor of bulls. I believe indicators are in a strict positive stance with plenty of room to the upside. The contract high at 1467.75 is the only upside target left. Corn is called 2-4 Higher looking to move against the contract high at 744.25 with any outside help today. Once above $740 there is nothing to stop the move but there will be profit taking heading into the weekend so look at a quick move above this level as a profit taking decline and a pause in the bull market. Indicators are in a positive stance with room to the upside. Wheat is called 8-10 Higher with KC and Minni looking modestly weaker than us. It is breaking out of the wide short term consolidation channel with the 50-day sitting at 840 ½ acting as the next upside target. Indicators are in the bottom end of the range in a positive stance offering the best formation of the big three commodities. Meal is called Flat-1-dollar Higher looking for a reason to move above the 50-day MA sitting at 375.00. Indicators support a positive stance moving forward. Bean oil is called 50-60 points Higher with the overnight matching yesterday's high. Above 59.35 look for a move against the contract high at 60.50 in the coming session.
Fundamental: The Russian PM overnight stated they will have to expand their grain export restrictions to the end of 2011. The original date for removal had been the end of June. This was generally expected by the trade but shows the damage to their winter crop is greater than expected.
Asian (Chinese and Indian) markets were higher overnight helping the bullish sentiment with Indian beans up 1% and their oil up 1.1%. This is due to Chinese demand talk and problems with Brazilian loading.
Argentinean farmers continue to protest but this is a lack luster protest at best. If feels more like they are just avoiding work rather than actually arguing about wages. The deal is expected shortly.
Argentina suspended Cargill, ADM and Toepfer from a key grain registry program. This will raise their tax burden to 15% from 2%. This is in response to documents gathered that stated they are not paying their "fair share". They will be added to the list again if they pay the back taxes. This is delaying shipments with even loaded boats not able to leave port without documentation that is being withheld. This is a bigger deal than the most recent raids and needs to be addressed by these multinational companies. The supply disruptions will make China nervous.
Rains and sleet remain active over the Midwest with the central eastern delta getting another drink. The recent rains have recharged their top soil moisture levels while leaving their subsoil lacking. This will allow for fieldwork and planting but they will need early timely rains to help solidify a root system to protect against any summer heat stress.
Continued rains in Brazil centered on the central and northern regions with another 2-6" expected over the next 10-days. This will continue to stall loadings out of Paranagua causing more and more to come to US shores.
The US AG Attaché pegged Argentine bean production at 49 MMT with exports at 13.75 MMT. This is generally expected by the trade with a fair production range now between 48-50 MMT. The trade is leaning closer to 50 MMT due to recent and timely rains.
Open interest shifted as follows: Corn +1717, Beans +2564, Wheat +2005, Meal -132 and Oil -515. Nothing exciting here shows the lack of fresh participation but a lack of interest in selling any pop shows a bull sentiment.
MACROS: Are helping but there is only minimal momentum. The US jobs report was bullish the USD and bullish stocks with the levels falling to 8.9%. This may have been priced in yesterday with the big move then.
Gold is trading .60 higher sitting at 1417.00 per troy ounce.
Crude is trading 1.49 Higher sitting at 103.40 as of 8:30 CST.
The Euro is .0009 Higher against the USD trading at 1.3974 consolidating just under $1.40.
The Yen is .22 Higher against the USD trading at 82.63.
July Cotton is trading .700 Higher sitting at a new high of 202.97.
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