Market eyes Tuesday's planting report
Corn, new crop soybeans and wheat all closed higher. The main features during today's session were the continued concern of the falling US dollar, unwinding of the old crop/ new crop beans spreads, and uncertainty over the weekend weathers effect on corn planting.
The corn market continues to find support from the delayed planting and the inflow of investor money into commodities due to inflations concerns. How the weather ends up this weekend and next week will determine whether corn prices need to be closer to $5.00 or closer to $4.00 as we head into rest of the growing season. The latest forecast has a number of chances for rains from now until Tuesday for the delayed areas. After Tuesday, the weather looks to dry out for the rest of the week into next weekend. However, with the way the weather models have been changing we will have to wait and see what the actual coverage and totals are when we resume trading after the holiday weekend. In addition, the markets will be closely watching the Tuesday's crop progress report.
Soybeans remain driven primarily by old crop fundamentals. However, old crop beans were the weakest on the floor today. The weakness in the old crop beans appears to be funds rolling out of their long postings. China continues to buy soybeans and soybean meal. Despite Brazil being cheaper than the US, sales were extremely impressive again this week. Also, Interior basis levels continue to rally and very little soybeans are moving. The relentless buying by the Chinese importer is quickly creating a supply squeeze. November soybeans closed on new highs for the move. Therefore, if money continues to enter our markets and China continues to buy our soybeans, then we could see another leg higher. I still think there is the risk of a lot more soybean acres, but we won't get those numbers until the June 30th report. With sales as strong as they are, the soybean market is getting very uneasy.
Wheat closed the strongest today. Although it has the weakest fundamentals, it has the largest Open Interest compared to crop size and when "new money" comes in it has the hardest time finding natural sellers. The weak dollar and the recent rally in Black Sea wheat have provided support. In addition, spring wheat is still way behind pace and people are concerned that we will still lose acres. I feel that a winter wheat producer should sell their winter wheat and buy HRS calls. HRS wheat still has to get through the growing season and winter wheat is finishing up, and in good shape in many areas (I realize some areas are in bad shape). HRS (Minneapolis) calls are "priced" much lower than comparable SRW (Chicago) calls. Good rains have rolled through Argentina and Australia and this should help boost production. Wheat stocks look to remain very large and will need to pick up demand. The USDA has a large "feeding" estimate written down for wheat. Currently, the market is not priced to feed ANY wheat. Although new money could continue to rally wheat from here, a failure to feed wheat in the U.S. this year could cause ending stocks to rise to 800 million bushels.