A bucket of bearish news has emerged
Recently, we talked about how the soybean/corn price ratio had gotten out of hand for the 'actual' fundamentals vs. the USDA projected fundamentals. USDA is still using intended acreage figures from March 1 surveys - and an eternity of new information has emerged since that time:
1) The planting season has been great, meaning 10 million acres of PP will no longer be a reality. Net result is another 8 million acres are
likely already planted in the US than projected in March.
2) Winter wheat is 2-3 weeks early in development. That means another 1 million or more acres will likely be double cropped to soybeans.
3) Ideal planting conditions this spring likely mean an above average crop yield for corn and soybeans; USDA so far has only adjusted the corn yield up 2 bu/acre. Soybeans could also be hiked 0.25 bu above trend.
4) Winter wheat and oat ratings are well above normal, indicating so far the US growing season has been above average for yield potential of all crops.
5) The drought in the HRW wheat and Delta is over this spring; rainfall has replenished soil moisture levels in much of OK, TX, and KS by May 1 this year.
6) As early as winter wheat was in 2012, virtually no freeze damage occurred during susceptible April.
Recently, a new problem has emerged that has the grip of attention of traders. Wheat droughts in Russia and Ukraine have spiked wheat $1/bushel last week, in the biggest one week gain ever, percentage wise. There is also concern about dry weather in KS recently which trimmed the record large yields back in that state (although many other winter wheat states still have record shattering yield potential).
That spike higher has put wheat and corn into position to possibly break the recent downtrend in those two grains. Chicago wheat rallied to new recent highs (although KC and Mpls didn't follow), and now even with a break this week it looks like it could be just a correction in an otherwise bull market? Otherwise, if trends remain down (like all other commodities right now) then last week's spike looks really odd on charts.
But, while corn and wheat look like they may be breaking downtrends, soybeans fell to new recent lows this week. That is a sign of a bear market, and soybeans continue to lose ground relative to wheat and corn. Already, soybean/corn price ratio has dropped back down to a near normal 2.4 ratio for 2012 crops, and that is downright ordinary. It seems a foregone conclusion that another 3 million acres of soybeans were likely planted this spring vs. normal. Bottom line: soybean trends remain down, but corn/wheat is trying to rally.