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256729

Sellers Need to Be Patient, Analyst Says

Grains started off the week on a poor note, beginning the day Monday higher and then closing lower. This was a negative technical sign, and formed downside reversals on the daily corn and wheat charts. Soybeans look a little better, but all grains are soft as we enter spring.

South American (SAM) crops once again look like a decent crop was produced, especially in Brazil. So the recent hike in world ending stocks due to the improving South American crop estimates has put grains on the defensive.

SAM weather forecasts continue to call for mostly normal precipitation for both Argentina and Brazil, with temps above normal for Argentina and normal for Brazil. This has been an improvement in rainfall forecasts for Argentina, but the weather has been relatively steady in Brazil most of the growing season, which has led to above-average crops. Argentina has also had a forecast of above-normal temperatures most of their summer (our winter), and that also is good for the southernmost growing region in the Southern Hemisphere (just like warmer-than-normal weather is good for the northern growing region in the Northern Hemisphere). So overall, we have abundant supplies in the world of grains, and that shows in the sagging prices.   

U.S. weather forecasts for the next 14 days have increased the precipitation amounts for both the seven-day period and the eight- to 14-day period. The increased wetness will likely slow down the start to planting and delay the beginning of spring planting for many states. Temperatures are still forecast to be above normal for the seven-day period, and continue warming into spring.  

We are getting to the point in time when U.S. weather begins to dominate the trade on a daily basis, as U.S. crop size is determined pretty much by the weather. In spring, we also have the extra weather factor of determining not only what crops get planted this spring, but how much total acreage gets planted. So U.S. weather will now become more important as we move forward. Winter wheat crops also are in critical need of some moisture in many areas, so an improved precipitation forecast at the end of March is probably also beneficial for winter wheat crops as well.

We are starting to get into the production season for U.S. crops, and the next bit of information we get from USDA comes at the end of this month in the acreage intentions for planting. Most expect an increase in soybeans acres and a decrease in corn acres; the only question and debate seems to be how much acreage gets switched from corn to soybeans. USDA so far has guessed about 88 million acres of soybeans and 90 million acres of corn, but some have those numbers flip-flopped. So there could be a 2 million or more acre surprise in the report March 31. Pro Ag thinks HRS wheat acreage will be flexed to soybeans as well.  

So the stage has been set for this spring, with the large stocks of grain on hand pressuring grains somewhat as we move forward along with the expectation that the SAM crop will be a good one.  

On the bullish side, just starting a new crop year might be friendly, as we may be able to put 2016 in the rear-view mirror and focus on the possibilities for this crop year. Demand still is strong, as exports of corn, wheat, and soybeans still seem to be the bright spot in what otherwise is a negative market. If demand can remain strong, and we produce anything less than a decent crop of ‘trend’ yields or higher (as we have the past three years), then maybe grains will have a shot at going higher. But so far, there doesn’t seem to be much life in the grain markets as we start the spring trading, so it is taking more patience for sellers in this still negative market tone.   

Ray Grabanski is President of Progressive Ag Marketing, Inc., the top ranked marketing firm in the country the past eight years. See http://www.progressiveag.com for rankings.

This material has been prepared by a sales or trading employee or agent of Progressive Ag Marketing, Inc. and is, or is in the nature of, a solicitation. This material is not a research report prepared by Progressive Ag Marketing's Research Department. By accepting this communication, you agree that you are an experienced user of the futures markets, capable of making independent trading decisions, and agree that you are not, and will not, rely solely on this communication in making trading decisions. 

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