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Outlook from the CBOT Floor for April 16, 2012

04/16/2012 @ 2:02pm


Coming back from the weekend I see negative macro factors adding momentum to bearish weekend weather. The trade is fading due to good weekend rains in MN, IA and throughout the Midwest and a lack of fresh demand from China or anyone else for that matter. Weak crude markets and a strong USD make many weak longs sweat to start the week. It’s a rather slow news day and week ahead with Chinese weather, Saudi claims to lower oil prices and Spanish bond sales biggest international factors. Domestically traders have new home starts on Weds, NOPA today and crop progress to set the early tone. Early talk has corn 25-30% planted versus 7% on average. This quick pace should stall this week due to the recent excessive rains in areas but this is not a bullish factor. We are well ahead of pace and will still effectively have the corn crop in the ground by May 1st. Domestic weather is wet across much of the Midwest with a minor, and I mean minor frost threat in the OH river tonight and tomorrow night.

From a trading perspective, the trade looks and feels very tired. There is no food for bulls but spreads still offer a minor bullish impact. With all the recent rains, new crop corn should feel more pressure than old crop after the recent fall in CN-Z. The 80-cent level held offering reversal momentum but this is dependent on continued demand. With the roll period officially over there is no real movement expected from the money flow side midmonth. As discussed on the 2012 Grain Forecast report out last week, another opportunity is in beans.

Looking to today, it’s another downside day with a possible flush out in corn and beans due to negative technicals. CK traded back under the 100-day MA on Friday with only the range low at $6.00 offering any support. Beans appear toppy but as we have seen, this market does not want to give up. The 200K long will be watching closely looking to exit at the first sign of overt weakness. SK-N sits at 3.5 to the carry starting the week with this a major indicator of front end weakness. I expect this to widen all week with a possible close on Friday closer to 8-cents. Wheat may try to show relative strength versus corn and beans due to the 88K fund short and relationship values.

The tone for the week is lower and should remain so as long as weather doesn’t turn too cold and the Saudi’s are really going to increase production. The world feels a bit overbought with macros, weather and weak demand all helping bear rule for a while.

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