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Outlook from the CBOT Floor for April 2, 2012

04/02/2012 @ 10:20am

On Friday traders saw a wild sessionOld crop corn hit and closed limit higher in May aloneOld/new corn spreads blow up, and old/new bean spreads weakened on the rallyNew crop beans gained on low acreage expectations, wheat gained on short covering and meal spreads spoke bearishWhat a messBig shifts due to month end were seen with the bean spreads most bearish along with old crop mealThe biggest of note is the all the sudden bearish K/X bean spreadThis spread topped around 54-cents and is now at 41With the impending roll there is minimal interest in loading up in the front monthRemember that if this spread were truly “good” K/N would not be trading at a carryI say this is money flow and now with acreage a question in new crop all the incentive lies with November over MayI feel this spread could easily trade right back into even money or a carry over the next 3 weeks offering great potential for bear spreaders

On the other hand, traders saw K/Z and N/Z trader well wider as new crop acreage is all the sudden bearishLet’s examine this: New crop acreage is thought to be 95.9 million acres with a new crop beans corn ratio at 2.54…interestingThere are way too many acres in the northern regions producers have not put nitrogen onThis means they can shift part of their all the sudden strong Minneapolis wheat to the fertilized land and plant more beansAs cash beans approach $14.00 all the potential lies with beans, not corn in the northWe will still plant plenty of corn but 96 million is too hopefulThink closer to 95 million on the June acreage reportThis is a shift to both oil seeds and spring wheat if the strength remains

The interesting thing of note coming out of Friday was open interestBig gains in corn and beans while only bean oil saw a dropLooking into beans, a jump of 31,204 raises an eyebrowIf Friday was supposed to see profit taking due to month end I do not see itAnother concept to consider is index fund reweighting. If a fund has 4% of their portfolio allocated to beans, that percentage is now 5.2% following the 80-cent rallyBloomberg put out a story stating funds trimmed their positions in commodities by 1.8% to end March but once again open interest does not agreeCorn open interest jumped 17K and meal jumped 5KSignificant gains in the face of questionable fundamentalsIf the pull in meal is real, where is the cash bid? Remember that H/K meal left around 4-dollars to a carryK/N will likely trend there quickly as soon as these funds roll which is over the next couple weeks

Looking at the week ahead, markets have a gap in information with the WASDE report due out on April 11thThey do get the first look at crop progress todayWinter wheat is the focus with high expectations for ratingsCorn may show planting but this report is a preliminary number so do not expect anything aggressiveOutside of that look for pathetic export inspections for corn today with beans far betterExport sales on Thursday should show weak corn and hefty beans once again

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