What's leading, soybean or wheat market
After many weeks of watching the soybean market lead the bullish charge, it would appear a new leader has gradually taken over. Wheat has assumed the role, with corn following along quietly. Soybeans are still wrestling with their own unique set of influences.
Wheat has both supply and demand issues and a great deal of uncertainty surrounding it. Combining a concern over dry weather, potential ripped up acreage in the SRW Belt, and the evolving Ukraine situation, wheat prices have rallied over $1.50 since the end of January. So far this week, May wheat is up 20 cents. July wheat is as high as it’s been since June of 2013.
For wheat, weather forecasts continue to be crucial. When will there be a widespread spring rain event? Soon enough, more and more attention will be paid to weather forecasts for the Corn Belt, where below-normal temperatures are still hanging around. Spring weather may also affect one other market fundamental, basis levels. Just like the difficult winter and railroad logistics issues meant the Canadians couldn’t move grain to market, the same idea applies to the Dakotas and Minnesota. Look for the movement of corn and soybeans from west to east and a resulting softening of basis levels.
The soybean story continues to evolve. U.S exports continue to be larger than necessary to reach the USDA’s forecasts. There have been small amounts of U.S. bean sales to China canceled. In Brazil, the Chinese have been much more aggressive and continue to negotiate with the Brazilians to cancel or defer as many cargoes of beans as possible. Today’s rumor was another 10 to 12 cargoes. They have also sold cargoes to the U.S. (to Southeast crushers, for example). The question becomes: When is it enough?
There are fewer and fewer days left until the acreage and stocks reports due Monday, March 31. On Wednesday, a private survey of acreage showed corn acres at 90.9 million and soybean acres at 83.6 million. This seems to add to the number of market participants who are forecasting around 83 million acres of beans with a low number of corn acres (91 to 92 million). Did the pendulum swing too far in the direction of beans? Another survey should be out tomorrow (Friday) during market hours.
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