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Bull traps?

Agriculture.com Staff 04/29/2010 @ 6:42am

Markets had been making some runs at highs recently, trying to turn trends from down to up in grains with soybeans leading the way higher.

However, something happened in the bull market, which although the Dow was leading all markets higher (pushing above 11,100), the bull markets stalled in corn and wheat this week, taking some negative technical turns along the way.

While wheat and corn also were heading higher and pushing into some resistance areas last week, this week they encountered some news that was difficult to shake. Planting progress in the US was well ahead of normal, with 50% of corn planted vs. only 22% normally - a new record fast planting pace. Many producers continued to plant this week after dodging rains over the weekend, and now planting progress is probably closer to 2/3's compelte in corn. Its likely that producers planted a few more acres of corn than they planned with such an early planting pace, and also its likely that the corn yield from such an early planting pace will go higher than 'trend' this year by a few bushels (at least). We may have added another 300-500 mb of corn to the earlier projections using March acreage and a trend yield, all of which will be added to the carryout figures.

After corn pushed to new lows this week, it was announced that China bought 4 mb of US corn imports - the first in many years. That popped corn back up into the trading zone of previous days, and puts the break in some jeopardy but the damage may be done technically in the corn market.

Wheat also struggled this week, with a huge downside reversal Monday that turned the technicals from one that looked friendly to one that looks a little ominous for now. The market is starting to struggle a little more, with some pressure coming from the corn market but also from a winter wheat crop rating that is quite high (69% rated good/excellent), with our Pro Ag yield model well above the trend yield of 46 bu (at 48.8 bu/acre). Spring wheat planting is also accelerated at 43% planted vs. only 27% normally. It might be much more advanced than that by this weekend, with northern Plains mostly dry this week, and with very active planting most of this week. It's likely that we will be able to pencil in above average yields for now in HRS wheat as well due to early planting. There might even be more acres planted of spring wheat, and that will lead to more bushels. Prevented planting may be a thing of the past, too, as conditions are almost perfect for planting this year. So more acres and a better yield might lead to lower prices in wheat as well.

The lone market that hasn't seen negative implications so far is soybeans, with its strong export sales and shipments continuing to hold prices at levels that indicate we are still in an uptrend for soybeans. However, that uptrend will be threatened with a few more down days in soybeans, and this week's price action is showing some cracks in the bull armor of soybeans as well. South America still has a stellar crop (even though Argentina ratcheted down their yield projection somewhat), and the US soybean planting pace is going to be accelerated as well as the corn and wheat as farmers will only have their attention on planting soybeans now that many have their corn planted.

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