Tone is bullish heading into March USDA reports
Synthetic Closes: based on the options trade, the following are the synthetic option close vs the futures limit down close. CK 541-542 vs 547, CZ 552-554 vs 559, SK 1357-1362 vs 1408, SN 1370-1378 vs 1421, SX 1285-1290 vs 1311, SMK 344-346 vs 350, SMN 350-351 vs 353, and BOK 6050-6100 vs 6333. If these synthetic options are able to maintain into Sunday's electronic trade, soybeans and soybean oil may be set up for another limit down move.
For The Week and thus far in the month of March: May corn futures closed down nine cents (-2%) per bushel vs last Friday's closing price, May soybeans down one dollar and twenty eight cents (-9%) July CBOT wheat up sixty eight cents (+7%), July KCBT wheat futures up forty cents (+4%) and July MGEX down one dollar and seventy six cents (-13%).
Historical Price Trends: best odds for the week of March 10, according to our HPT page are for cattle. Over the most recent ten years, odds of 80% favor a lower close next Friday for Live Cattle than where they closed this Friday by an average of $2.24. Please see the HPT page for the complete list.
Observation: lower weekly closes for corn, soybeans and MGEX spring wheat futures are technically bearish with #2 MA's used as immediate resistance. Both KCBT and CBOT July wheat futures continue to maintain a very strong up trend which began in the month of January.
Corn Fundamentals: South Korea's Ag Ministry announces the country has already purchased 50% of its 2008 grain needs as end users fear of rising international prices. A Great call by S Korea if prices rise as a result of a weather related problem. What "IF" weather is not a problem and turns out to near ideal, South Korea may likely cancel those higher priced contracts in favor of less expensive. The USDA Ag attache within China is estimating a smaller 2007/08 crop. This would be bullish to old crop futures. Weekly export sales the past four weeks have been off 10% vs the five year average but could project final 2007/08 marketing year exports at a level of 2.578 billion bu, 128 million more than USDA's present projection of 2.45 billion bu.
March 11th: USDA is scheduled to release its March World Ag Supply and Demand estimates on March 11th at 7:30 am central time. Allendale estimates 2007/08 end stocks of 1.422 bil bu vs last months estimate of 1.438 billion bu vs 2006/07 end stocks of 1.304 billion bu. Allendales reduction is based on month of Feb stronger than usual export sales. Range of estimates for the report are 1.388 bil bu to 1.488 bil bu.
Trade Posture: Long term, Allendale remains bullish to old and new crop given our outlook for reduced corn plantings in the spring of 2008.
Soybean Fundamentals: Rumors have China releasing 600,000 to 700,000 tonnes of its government soybean oil stocks to the domestic sector to ease rising prices. Interesting to note, of the major world importers, China holds the largest soybean oil stocks. As a percent of major world importers stocks, China accounts for 72% of the share, India 27%. Brazil's government agency increased both corn and soybean production estimates citing good weather as the main reason. Keep an eye on spring weather developments in China's northeast, it is dryer than usual. China announced soybean acres to double in its number one producing province for 2008 vs 2007.