Content ID

255084

Winter Is a Good Time to Buy, Analyst Says

Grains have been struggling as of late, with South American production starting to come online with expectations that Brazil is about 10% harvested with its production. Weather has been relatively good in Brazil, with private estimates of crop size increasing recently with the cool and mostly normal precipitation weather they have enjoyed. Argentina has also had some improvement in weather, with a period of dryness after heavy rains caused some flooding in early January. Now, weather has returned to a more normal pattern, with normal rainfall and normal to above-normal temperatures. This has not been a threatening forecast for South America (SAM) thus far this growing season.  

So in spite of continued strong exports, prices have drifted sideways to lower recently. This week’s export weekly export inspections were good once again at 60.1 mb soybeans, 43.8 mb corn, and 22.7 mb wheat, so really the exports are continuing their strong pace. But exports alone can’t push grains higher, as the growing crops in the fields of South America may be providing more direction than the pace of U.S. exports right now.  

SAM weather forecasts have changed little from yesterday, still forecasting for the next two weeks normal to above-normal precipitation forecast for virtually all of Argentina and Brazil, which will help grains to fill as we finish out this growing season. But it also could hinder harvest in northern Brazil, which has begun. Temperatures will remain below average in Brazil and normal to above normal in Argentina, a very consistent pattern this growing season for SAM. This forecast is likely to lead to more production for SAM, with Brazil production expected to be hiked in this week’s USDA report.  

After the recent bounce higher in grains, we could see another setback and test of the recent lows. We would buy back half of previous hedges if we dropped to $10.01 (next support in soybeans), and target another setback to buy back the rest of the 2016 hedges. For March corn, we could drop to next support at $3.49 March futures, where we would buy back half of 2016 hedges. $5.44 March Mnpls wheat is still a good place to put long positions on in the wheat market.   

We believe winter is still a good time to buy grains after we’ve depressed them with the big crops we produced in 2016. Record-large crop yields generally produce low prices, and that is just what we have received in the winter of 2016-17.  

But as we said last week, once we turn everyone bearish, the corn market will have to deal with a loss of anywhere from 4 to 6 million or more acres from last year for 2017. Then, yields are unlikely to be 175 bushels an acre again in 2017 like they hit for a record-shattering yield in 2016. Instead, trend yields are more like 170 bushels per acre, and the same can be said about U.S. soybean yields as they are unlikely to hit 52 bushels an acre when trend yields are 47.5 bushels an acre.  

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. 

DISTRIBUTION IN SOME JURISDICTIONS MAY BE PROHIBITED OR RESTRICTED BY LAW. PERSONS IN POSSESSION OF THIS COMMUNICATION INDIRECTLY SHOULD INFORM THEMSELVES ABOUT AND OBSERVE ANY SUCH PROHIBITION OR RESTRICTIONS. TO THE EXTENT THAT YOU HAVE RECEIVED THIS COMMUNICATION INDIRECTLY AND SOLICITATIONS ARE PROHIBITED IN YOUR JURISDICTION WITHOUT REGISTRATION, THE MARKET COMMENTARY IN THIS COMMUNICATION SHOULD NOT BE CONSIDERED A SOLICITATION. 

The risk of loss in trading futures and/or options is substantial and each investor and/or trader must consider whether this is a suitable investment. Past performance, whether actual or indicated by simulated historical tests of strategies, is not indicative of future results. Trading advice is based on information taken from trades and statistical services and other sources that Progressive Ag Marketing believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that advice we give will result in profitable trades.

Read more about
Loading...

Talk in Marketing