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Market has bears on defensive, traders say

Agriculture.com Staff 02/13/2016 @ 7:46pm

CHICAGO, Illinois (Agriculture Online)--Technically and fundamentally, the agricultural futures markets remain bullish, Chicago Board of Trade floor traders say.

On Tuesday, the CBOT soybeans recorded an all-time record high for a nearby contract at $14.11 per bushel. On Thursday, the eCBOT March soybean contract traded $14.14 3/4 per bushel. CBOT corn is trading comfortably above $5.00, and wheat is consistently over $10.00 per bushel.

Wednesday's trade, with considerable pressure on corn, soybeans, and wheat, recovered slightly at the end of the session.

Vic Lespinasse, Illinois Grain, says the bears are on the defensive.

"The charts support the bulls, the price trend is up, crude oil is at an all-time high, and China is having crop trouble. Today's trade absorbed price pressure and finished better than expected," Lespinasse says.

China's admission that it is losing more of its rapeseed crop from a cold snap is a real concern, traders say.

Last year, China raised a rapeseed crop at 8.0 million metric tons, shortened due to drought. Therefore, China increased acreage in 2007 with hopes of a 10.0-12.0 million-ton crop. But, with the cold snap, the rapeseed crop may be around 8.0 million tons, one trader says.

"That leaves China looking for oilseeds," the floor trader says. After their Lunar New Year holiday, the thought was that China's demand would level off. Then their soybeans and soy products’ prices jumped."

Along with China's demand, Chicago Board of Trade prices remain around the $14-per-bushel level.

The market is seen hovering around the $14 level until new news arrives, traders say.

That new news may come in the form of budgetary estimates that the USDA announces during its annual Outlook Conference on Thursday and Friday in Washington, D.C.

"Because it starts to put the focus on this year's new crop, the USDA report does have market impact," the floor trader says. "But, it's not a scientific number, so you don't look at it too long."

Right now, it's hard to recruit a person to sell futures contracts with so many bullish signals.

Traders see the Thursday-Friday USDA Outlook Conference providing even more bullish fundamentals, with an expected tightening of supplies.

Meanwhile, traders see a move to higher soybean prices with any hiccup in crop weather.

"You have a little bit of that right now in China. Plus, Brazil could be doing better on harvest. Every cargo we move because Brazil isn't ready to ship adds to our old-crop tightness," he says.

He adds, "It is hard to recruit a short here. There just is too much we don't know. I don't know where prices can stop. We have seen some $22 call options lately. This says that people are willing to put those high strike prices out there in a year when we have the tightest grain stocks ever."

In addition, "When elevators are not accepting hedge-to-arrive contracts, a lot of producers have sold some of their 2009 crop below the current market by $2-$3. They can't afford to sell any more futures contracts without a crop in hand."

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