New lows, then bounce
Last week we wrote about how grains were in some trouble, and by the end of the week we formed new recent lows on charts in corn, wheat, and soybean meal (not quite in soybeans due to bean oil strength). We extended those losses Monday in corn and wheat, only to bounce back strong on Tuesday in a nice recovery mode led by soybeans. We could extend those gains in the market more this week, but look out below once we have made our recovery! Sometimes when bear markets get back on track, they can be really nasty.
South American production continues to get the best weather in years, with rain subsiding enough to allow more rapid harvest progress in the central part of Brazil. That's about perfect for them, as they are in need of some drier weather to allow the harvest to advance further. Argentine weather also seems ideal, with some rain mixing in with their above average temperatures to allow optimal growing conditions for grains. Of course, this is a rain forest in many Brazilian production areas, so below normal precip still means some rain delays in harvest. But overall, below normal precip is forecast the next week or so, and should allow better than average harvest progress.
US exports of soybeans continue to ship at an outstanding pace, with over 30 mb shipped again this week. But the worry is on the export sales side, where China canceled more than all the other sales last week for a negative sales week. That is a concern to the market Thursday morning, and Pro Ag noted the only big sale last week to China was for the 2010 US crop, not 2009. Could it be they are already switching their sourcing to cheaper South American soybeans?
Even the corn and wheat markets are having difficulty, as they continue to struggle on technical charts with new recent lows. They have had a little recovery the past few days, but then even the eye of a hurricane is quiet! The planting delays so hyped already for mid-March are already getting some bulls excited about a run higher this spring. Once the recovery is over, it might be interesting for the market to note that most of the snow has already disappeared in most of the US, with an early thaw in most areas. If the US begins planting early on the early thaw, all bets will be off and the eye of the hurricane may turn once again into a raging bearish storm!
We note that ND corn producers are still trying to harvest the 2009 crop of corn, with much difficulty. The window is just so narrow from melting enough snow to allow combining to proceed, to dodging flowing water in fields from the runoff of the snow. This is a very fine line, and we find it amazing that some producers have the fortitude to slip into that narrow window to harvest some corn. So far, we haven't heard of any buried combines in the mud, but that might be forthcoming. Some MN combines were shut down this week due to the thaw of frost, and now fields will no longer support combines. That window for ND producers might also close this week with warmer weather. However, the weather can change, and in mid-March there is always the chance of another hard freeze which would be favorable if its unaccompanied by more snow (or rain).