Technically, Corn Has Upside
Corn prices rallied after a somewhat friendly report, reversing corn's price fortunes today after starting the day 15¢ lower. We finished with 10¢ gains, a full 25¢ higher than the day's lows and at the top of the daily range.
We pushed to new recent highs in the corn market, so now the technicals are positive for corn going forward.
In the report, corn stocks were about 100 mb smaller than expected at 7.010 billion bushels, but still above last year's 5.4 billion bushels when we were running out of corn stocks. We will have enough corn to finish this year, but stocks will be smaller than many expected just a few months ago. Acreage intentions were also smaller than expected, with only 91.7 million acres of corn intended to be planted in 2014, about 3.7 million less than 2013 acreage, and about 1.2 million smaller than expected by the trade. That amounts to about 190 mb smaller production than expected, so carryout projections might be reduced from earlier USDA numbers at the Ag Outlook in February. Overall, this is helping to improve the price outlook for corn in 2014.
We now have new recent highs in corn heading into April, and with adverse weather forecast for the 2014 spring (more cold and wet conditions forecast), that means a likely further reduction in corn acres if the weather doesn't straighten out in the last half of April. The next two weeks' forecast doesn't look good right now, with cold/wet weather forecast throughout the Corn Belt to start the first half of April.
The report was actually slightly bearish for wheat and soybeans, with stocks larger for wheat (21 mb) and soybeans (3 mb) than expected, and acreage for soybeans at 81.5 million acres vs. 81.37 million acres expected (or about 6 mb more production).
Wheat acreage was slightly smaller than expected at 55.8 million acres vs. expectations of 56.01 million, not enough to offset the larger stocks numbers.
Overall, this meant only slightly worse stocks/use ratios for wheat and soybeans for 2014, but due to the strong corn market, even wheat closed higher anyway Monday.
We are getting closer to some potential targets for advancing sales at $14.50 to $15 mark for soybeans, $5.40 nearby corn futures, and $7.50 CBOT wheat futures. For new-crop markets, $4.97 December corn (which was hit today) and $12.06 November soybeans are some targets that would be sales opportunities. Since corn closed with an upside reversal today after trading sharply lower, the technicals are pointed higher for corn now and should see some follow-through strength. That means maybe we can capture another 10¢ or so before making additional 2014 sales.
As we've stated before in the past few months, Pro Ag has been looking for a rally from January of this year into spring, and we have actually had a little stronger rally than we expected into the end of March. Let's hope this rally can continue, but the outlook for new-crop harvest prices is not good compared to current price offerings. It's likely once this spring rally is over, we will need to be aggressive sellers of grains of all kinds (wheat, corn, and soybeans) to end up with some profit in 2014.