Trade is mixed to start the day with the grains on the positive side and soybeans in the red. Grains are taking the majority of their support from technical short covering in oversold conditions. News that China was in and booked 300,000 mt of US corn overnight is also supporting that complex. Grains are taking additional support from ongoing weather conditions and flooding in the Midwest that are now expected to last for the next several weeks. Soybeans are struggling with a lack of fresh news and a growing possibility of higher than expected plantings this spring.
Corn is showing a stronger attitude going into the weekend as we see the much-publicized Chinese business finally was confirmed. China was in and booked 11.82 million bu of corn overnight. The question now is if this is a new purchase or the business that was rumored to have been shaping up last week. Rumors that China could be interested in another 20 million metric tons of corn would have more of an impact on the market if confirmed. This would cut the US carryout nearly in half. Concerns over the ability of the market to secure needed acres this year is also benefitting corn futures, as is simple oversold conditions. Advances in corn are being tempered by concerns over domestic usage, mainly ethanol, as 13% of the nation’s production is off-line from Midwest floods.
Soybeans are on the defense today with solid declines being posted in the complex. Concerns over demand are weighing on the soy complex, mainly in China. Chinese hog production is expected to decrease 10% this year from African Swine Fever, and that’s if no more cases are reported, which is highly unlikely. This disease is now spreading into other countries and will likely reduce their feed grain demand as well. The possibility of more soybean acres than initially projected this year is also hindering soybean futures. Losses are being held in check by a lack of competition in the global market.
The wheat complex is the leader in the market this morning as we see active short covering in that market. Wheat has been technically oversold for the past several weeks and we may finally be seeing the tide turn. We are also seeing elevated demand for wheat in the global market as South Korea made another purchase of feed grade wheat overnight. Building concerns over the quality of the winter wheat crop are also supporting futures this morning. Advances are being capped by technical resistance, which has prevented a rally for the past week.
This commentary is the sole opinion of Karl Setzer. This is intended for informational purposes only and not to be used for specific trading recommendations. The information used to generate this commentary is gathered from a variety of sources believed to be accurate. If you have any questions or would like additional market information, feel free to contact Karl Setzer at 800.858.3738, extension 411, or at firstname.lastname@example.org . You can also follow Karl on twitter; @ksetzergrains