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On-farm ownership falls


Wheat Commentary

Fundamental Support:

Wheat saw a round of
profit-taking today. There was limited new news to affect the wheat pit today.
With the corn market not able to hold its limit up move early, the wheat the
trade took some of yesterday’s profit off the table. Remember the reports on
Thursday were bearish for the wheat; it was corn spillover strength that lead
to the wheat market gains. On the export front Jordan purchases 50,000 tonnes
of optional origin hard wheat in a tender for 100,000. Funds were sellers of 4000
contracts on the day. For the week July Chicago was up 27 1/4 higher while the
KC July wheat was up 51 1/2 for the week. The Minneapolis July contract was us
41 1/4 for the week. The Minneapolis and KC markets were stronger as they are
being supported by weather problems and potential production problems. Now that
the numbers are out of the way, the trade will really start to focus on weather,
which should be considered bullish. The hard red wheat continues to miss rain.
This combined with seasonal warming and increased evaporation rates have the
crop under continued stress. The spring wheat crop will be watched to see if
all the anticipated 14.4 million acres actually do get planted. With the big
snow pack melting and more moisture on the way flooding is going to be a big
problem. This could cause the farmers not to get all their intended acres in
the ground, which would intern tighten the U.S. ending stocks.

Direction:

0404market1.jpg

Ownership:

One thing we were interested
from yesterday’s Grain Stocks report was farm ownership of this grain. The
chart here shows farm ownership, at this late in the marketing year, is at
three-year lows. Not only are buyers scrambling for quality high protein
product, but there is simply not as much out there in farm hands to buy. 

Working trades:

(3/31) Buy July KC Wheat at
880, risk 850, objective 950.


Closing Cattle Commentary



Live Cattle:

0404market2.jpg


Though there was some profit
taking for the week early on this morning we had a good finish. 

The best candidate for the rebound to the higher price was likely this morning’s
employment numbers. The economy continues its moderate rebound from the worst
of things in late 2009. We saw US consumers increase beef demand last year and
are currently seeing another bump up this year. We have been bullish demand,
for both the US consumer and exports, since mid 2010.

What About Japan?

Hopes for Japanese buying
got this market restarted since last Thursday. We have two weeks of data in
hand. One good week was posted at 3,900 tonnes and this week’s report, covering
last week’s purchases was poor at 1,900 tonnes. If we do get dreamland buying
from Japan then we should see 4,000 to 5,000 tonnes each week. That could keep
this cash cattle market at $120 for another three weeks. No amount of Japanese
buying we can think of (+50%. +100%, etc) can overcome the supplies we forecast
hitting in the months of May, June, and July.

Direction:

While packers have been
scrambling to find available supplies in the “right now” timeframe the supply
increase showing by mid month should solve some problems. One thing of
interest, the low point of supplies may have already been made two weeks ago.
After this week, we look for steady to lower prices in April then sharply lower
prices in May and June. Our expectations of a $106 price on June are purely
based on the large 15% increase in supply coming. We are holding our great
expectations of demand intact. 

Working Trade:

  • (03/01) Bought December/sold June 5.17, risk 3.17, objective 10.17. Closed
    4.82.
  • (03/29) Bought August 116 put/sold 122 call/sold 106 put -1.42, move risk to
    -3.82, objective +6.50. Closed -3.75.

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