Tag Archives: Grains

Wheat: Lower Prices May be Necessary to Attract Demand.

by on January 13, 2012

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NEAR-TERM MARKET FUNDAMENTALS: There was not much in the way of positive news from the USDA yesterday and the market gave back a large portion of the late December rally. March wheat closed sharply lower on the session yesterday as both wheat and corn data from the USDA was bearish enough to spark aggressive selling. US usage came in below trade expectations and wheat plantings for the 2012 crop came in well above trade expectations. The USDA pegged total winter wheat planted acreage for 2012 at 41.947 million acres as compared with trade expectations for near 40.933 million. Hard red winter wheat acreage was up 662,000 above trade expectations to over 30 million and soft red was up nearly 600,000 above expectations at 8.37 million. Ending stocks for the 2011/12 season were pegged at 870 million bushels, about 30 million above trade expectations. While exports were revised higher (as expected) feed usage was revised lower by 15 million bushels to 145 million which was bearish as traders expected a boost in wheat feeding. Wheat stocks as of December 1st were pegged at 1.656 billion bushels as compared with trade expectations at 1.695 billion. For the world report, 2011/12 ending stocks were pegged at 210.02 million tonnes, up more than 2 million from trade expectations and up from 199.9 last year and 202 million for the 2009/10 season. Weekly export sales for wheat came in at 365,200 metric tonnes for the current marketing year and 73,000 for the next marketing year for a total of 438,200. Cumulative wheat sales stand at 77.2% of the USDA forecast for 2011/2012 (current) marketing year versus a 5 year average of 75.2%. Sales of 279,000 metric tonnes are needed each week to reach the USDA forecast. On top of the weekly sales, Algeria bought 300,000 tonnes of optional origin milling wheat. Traders believe the origin is likely France or Argentina. The EU granted export licenses this week for 168,000 tonnes which pushed cumulative exports since the start of the 2011/12 season to 7.5 million tonnes as compared with 11.9 million last year at this time. March wheat is now down as much as 78 3/4 cents or 11.7% from the 2012 peak. Japan bought 139,000 tonnes of US wheat for March shipment. Egypt is tendering for optional origin wheat overnight with results expected this morning.

TODAY’S GUIDANCE: The technical action turned very weak with yesterday’s collapse and the build-up in open interest in the last few weeks suggest that the trade could stay volatile. Lower prices may be necessary to attract demand.

TODAY’S MARKET IDEAS: March wheat resistance comes in at 622 with 588 as next support.

Soybeans: South American Rain in 6-10Day Key.

by on January 13, 2012

Below is a sample of The Hightower Report’s Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!

NEAR-TERM MARKET FUNDAMENTALS: Outside market forces are looking slightly negative today. A weak demand tone for the USDA clashed with short-term positive demand news to helped the market see a strong recovery off of the early lows yesterday. March soybeans were down 53 cents early in the session yesterday but managed to rally 37 1/4 cents off of the early lows to late session highs. The USDA data was mostly bearish across the board but especially for the corn market and a limit-down move in corn helped to drive soybeans sharply lower. US soybean production came in at 3.056 billion bushels, up 10 million from previous estimate. Ending stocks, however, were pegged at 275 million bushels as compared with trade expectations looking for 233 million. Exports were revised lower by 25 million and crush down by 10 million. Without a serious drop in South America production, the USDA was in a position to drop usage and the increase in production and lower usage fell directly to the bottom line. World ending stocks for the 2011/12 season came in at 63.43 million tonnes as compared with 64.54 million last month. December 1st soybean stocks came in at 2.366 billion bushels, up 42 million from trade expectations. Weekly export sales for soybeans came in at 434,200 tonnes. Sales of 296,000 metric tonnes are needed each week to reach the USDA forecast. Net meal sales came in at 47,600 tonnes which was below trade expectations and compares with sales of 99,000 tonnes needed each week to reach the USDA forecast. Net oil sales came in at just 1,100 metric tonnes which was also lower than expected. As of January 5th, cumulative soybean oil sales stand at 31.7% of the USDA forecast for 2011/2012 (current) marketing year versus a 5 year average of 42.0%. Sales of 10,000 metric tonnes are needed each week to reach the USDA forecast. On top of the weekly sales, private exporters reported to the USDA export sales of 414,000 tonnes of US soybeans to unknown destination. The USDA news was negative but traders believe that the market would not be down as much as it was except for the outlook for improving weather in South America in another 8-9 days after heavy rains in the past few days. Traders will be closely monitoring weather forecasts in South America for direction as a return to a hotter and drier condition could cause further production losses while a shift to a wetter pattern would hold down losses. South Korea bought 55,000 tonnes of South America meal. India vegetable oil imports for December totaled 669,000 tonnes, down 22%. China officials want to raise self sufficiency in edible oils with an output target for domestic production at 24.4 million tonnes by 2015 from 20.1 million tonnes this season.

TODAY’S GUIDANCE: The South America crop conditions improved with the soaking rains this week and there is follow-up rains in the forecast for late in the 6-10 day period. This rain window will be important and could mean the difference between continued weak demand for US soybeans or a jump in demand as buyers shift away from South America if production concerns pick-up.

TODAY’S MARKET IDEAS: The technical action is weak. March soybean resistance is at 1191 1/4 with 1174 3/4 and 1158 as support. Look for 1158 to 1191 range for now.

Corn: Will Take Positive Weather to Avoid More Selling Pressure

by on January 13, 2012

Below is a sample of The Hightower Report’s Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!

NEAR-TERM MARKET FUNDAMENTALS: The USDA data showed a larger than expected supply of corn in the US and with lofty expectations going into the report and a hefty speculative net long position, a long liquidation trend is feared over the near-term “if” South America weather forecasts turn more normal. Big rains this week will stabilize crop losses but it will be important to see more rains by late next week and into next weekend in order to avoid further losses. March corn traded for just a few minutes yesterday before locking down the 40 cent limit. The market stayed limit down for the first two hours of trade and then saw a 2 1/2 cent trading range near the mid-session. The USDA data was very negative for grain stocks and production data and this helped spark aggressive selling from speculators and producers early in the day. The USDA pegged ending stocks for the 2011/12 season at 846 million bushels which was down two million from last month but near 100 million bushels above expectations. Final production was pegged at 12.358 billion bushels, up 48 million bushels from their previous forecast and up near 95 million from expectations. Yield was 147.2 vs. 146.7 previous. Exports were revised higher by 50 million bushels which was one of the few bright spots for the report. World ending stocks were pegged at 128.14 million tonnes from 127.19 million last month and trade expectations near 123.5 million tonnes. Argentina production was revised down by 3 million tonnes to 26 million and Brazil was left unchanged. Some traders believe South America production is down at least 10 million tonnes from December expectations and not the 3 million from the report. December 1st corn stocks were pegged at 9.642 billion bushels which was up 250 million from trade expectations. Weekly export sales for corn came in at 321,500 metric tonnes for the current marketing year and cancellations of 23,000 for the next marketing year for a total of 298,500 tonnes which was well below trade expectations. Cumulative corn sales stand at 59.6% of the USDA forecast for 2011/2012 (current) marketing year versus a 5 year average of 53.9%. Sales of 493,000 metric tonnes are needed each week to reach the USDA forecast. Demand news is mixed but there appears to be increased interest in Australia feed wheat. The Philippines bought 55,000 tonnes of Australia feed wheat for May shipment.

TODAY’S GUIDANCE: With the large spec net long going into the report and perceptions that US producers have not sold a lot of old crop or new crop corn, selling pressures could resume next week “if” the January 21st to 26th rain event in Argentina looks fruitful. In other words, it will take positive weather news to avoid further selling pressures next week.

TODAY’S MARKET IDEAS: Short-term resistance for March corn comes in at 627 with 609 3/4 as a near-term pivot price. Support emerges at 600 and 586.

Special Report: Corn Volatility Alert!

by on January 11, 2012

Below is an excerpt from The Hightower Report’s most recent Special Report. To receive access to this report, with trade strategies, and our daily coverage of 16 markets, visit futures-research.com for your free 2 week trial!

Wide ranges of estimates for ending stocks and production for the upcoming USDA reports and continued weather uncertainties for late January and early February leaves the corn market in a potentially volatile trade setup into and beyond the Thursday, January 12th report window.
In January every year, the USDA Supply/Demand, Crop Production and Quarterly Grains Stocks reports are released on the same day, and for the last five years, the corn market has made limit moves on each of those days. In 2011, the market hit the 30 cent limit-up move and closed 24 higher on the day. In 2009 and 2010, the market closed down the 30 cent limit. In 2007 and 2008, the market closed up the 20 cent limit. With the wide range of estimates this year, prices look very volatile for later this week.

On top of that, extremely high temperatures after weeks of below normal precipitation has producers in Argentina nervous over the possibility that the crop had already experienced an extreme loss in yield ahead of significant rains that are due to start today. Most growing areas were well above 100 degrees over the weekend into Monday ahead of the rain, and losses are mounting. The expected lack of a shift in the weather pattern in spite of a good rain event this week leaves the market vulnerable to significant upside potential if the soils dry up again into late this month. Traders are concerned that after receiving 1/2 to 1 1/2 inches of rain this week, crops will be back into a stressful condition in another week. Temperatures are expected to move higher into the coming weekend, and there currently is no other organized rain event in the forecast.

Traders expect corn production in the US to be revised lower by about 45 million bushels for the USDA production report on Thursday morning, due to a revision lower in yield or even harvested acreage. However, there is a 210 million bushel range for the report. US Ending stocks are expected to be revised down by about 100 million bushels in Thursday’s report from the 848 million that was estimated in December. However, there is a 433 million bushel range of estimates. Traders are looking for December 1st corn stocks to be down about 660 million bushels from the previous year. Stocks last year were 10.057 billion bushels. However, there is a 500 million bushel range of estimates for that number.

Global ending stocks for the 2011/12 season are expected to be around 123.5 million tonnes, down from 127.1 million estimated last month. However, with the damage done to the South American crop since January 1st, many traders see the ending stocks eventually falling well under 120 million. If we assume an ending estimate of 119 million, world ending stocks would fall to a 50-day supply, the lowest since 1973. This compares to 56 days last year and 64 days two years ago.

Some traders are looking for lower yield, lower harvested acreage, higher feed usage, better ethanol demand and higher exports due to the sharp drop in Argentina production. This could spark extreme tightness in the old crop ending stocks for the US and the world. However, with higher plantings and normal yield this coming season, traders are expecting a lesstight situation for 2012/13. And while we debate “how tight” U.S. and world ending stocks will be if we lose 8-12 million tonnes of corn in South America, a minor jump in US planted area and a 164 bushel per acre yield for the 2012 crop would result in an increase in US production of about 50 million tonnes.

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Soybeans: Yield Reports From the Field Showing Better Than Expect

by on October 27, 2011

Below is a sample of The Hightower Report’s Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!

NEAR-TERM MARKET FUNDAMENTALS: Ideas that the break was overdone yesterday plus the sharp break in the US dollar to the lowest level since February 7th plus a surging stock market are all seen as positive forces to start the sessions today. Rumors that a large brokerage firm may need to exit long positions in grains, livestock and energy markets if the firm needs to be sold helped to keep pressure on the market late in the session yesterday with November soybeans closing near the lows despite a jump in equity and metal markets. Long traders appeared to be stepping aside due to more volatile trade in financial markets into the EU meetings on the debt crises and this sparked fund trader selling in a wide range of industrial and agricultural commodity markets. Traders indicated good weather for the planting season in South America and concerns for slower than expected US soybean exports ahead as negative factors. Many traders are pushing export forecasts down by 50-75 million bushels due to recent sluggish demand and indications that South America is still an active exporter this late in their season. There were rumors yesterday that China bought a few cargoes from Brazil for December through February shipment which added to the negative export forecast ideas. Brazil is typically out of soybeans at this time of the year with most of the business moving to the US. In addition, commercial traders indicate that Europe has bought no new crop soybeans yet. Weak crush margins have added to the negative tone. Sunflower meal from the Black Sea region is selling at a stiff discount to soymeal. Wet weather for the Eastern Corn Belt was seen as slowing the tail end of the harvest. December oil closed at the lowest level since October 10th. For the weekly export sales report this morning, traders see soybean sales near 800,000 tonnes and meal near 150,000 tonnes.

TODAY’S GUIDANCE: Yield reports in recent weeks have shown as many “better than expected” surprises as compared with disappointment. We have to believe that there is a possibility that the November estimate is raised slightly. If yield is up, South America supply still high, demand sluggish and next years acreage and yield move higher, one could see a significant jump in ending stocks for this year and next. Slow producer selling and supportive outside markets are short-term positive forces but the market looks vulnerable to more weakness ahead.

TODAY’S MARKET IDEAS: The close under 1226 3/4 for January soybeans soured the technical picture and the bulls need to see a close over 1254 1/2 to expect a more significant recovery bounce off of the lows. Resistance comes in at 1245 1/2 and 1254 1/2, with 1219 1/2 and 1209 1/2 as support. A resumption of the downtrend would leave 1117 1/2 as an objective. Outside market forces look powerful today and sellers may want to hold off for now.

Wheat: See Longer Trend Down but Could See Significant Recovery Bounce

by on October 27, 2011

Below is a sample of The Hightower Report’s Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!

NEAR-TERM MARKET FUNDAMENTALS: Outside market forces turned very positive overnight and with speculators holding a hefty net short position in the last COT report, some traders expect active short-covering today. Russia exported a record 3.8 million tonnes of grain and flour in September and took all of the Egypt tender business yesterday. Egypt bought 120,000 tonnes of wheat from Russia in their tender and some traders saw this as negative as Ukraine may be a little more aggressive on the next tender. Traders were a bit surprised that Ukraine was not a more aggressive on the tender with offers near $6.00 per tonne higher than Russia. There is 1/4 to 1/2 inch of rain/snow in the short-term forecast for the southern plains winter wheat areas and traders see the moisture as beneficial but the cold is a bit of a concern. In addition, the 6-10 and 8-14 day forecast models look dry. Crop conditions to start the season are unchanged from last year but still the worst since at least 1986. Ukraine areas also look dry. December wheat closed sharply lower on the session yesterday and closed near the lows. Funds were aggressive sellers on the day for grains and other agriculture and energy markets. The market had a firm tone into the opening on dry weather issues for winter wheat crops in the US and Ukraine but weakness in outside markets helped to pressure the market to trade sharply lower on the day and near the lows into the mid-session. A turn up in the US dollar had traders “less” interested in risky assets like agricultural futures and a long liquidation selling trend emerged. Traders see weekly export sales for this morning near 450,000 tonnes.

TODAY’S GUIDANCE: With open interest rising to the highest level since August this week, we can only assume that fund traders have built a larger net short position. The supply fundamentals are bearish but the new crop outlook is in question for the US and Ukraine and commodity markets are likely to attract “risk-on” buying after the markets avoided a major debt crises in Europe. While the longer-term trend may be down, we can not rule out a significant recovery bounce.

TODAY’S MARKET IDEAS: December wheat support is at 628 and 622 3/4, with 642 1/4 and 660 as resistance. With help from the other grains and fund short-covering, look for solid gains in the near-term. Keep 17.67 and 18.68 as next targets for January rough rice with light support today at 17.19.

Corn: Outside Markets and Rumors of USDA Lowering Yields Supports

by on October 27, 2011

Below is a sample of The Hightower Report’s Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!

NEAR-TERM MARKET FUNDAMENTALS: Will the EU debt crisis plan be enough to see fund traders return to grain and commodity markets as a longer-term buy and hold strategy is the big question this morning. Since early April, December corn has spent only a handful of trading sessions below the 630 level which was tested again yesterday. China has emerged on breaks below this level as an active buyer. If the financial markets settle down, trade focus is likely to shift to the upcoming Crop Production and Supply/demand reports from the USDA. There is a mix of trade ideas on yield but more and more traders see a smaller yield than last months estimate of 148.1 bushels per acre. However, traders also see stiffer competition on the export front which may be offset by higher than expected demand from China. Private exporters reported to the USDA a sale of 100,000 tonnes of US corn for unknown destination yesterday. Japan bought a cargo of Ukrainian corn for the first time in over one year and traders believe that if the quality is good, Japan may seek more of their needs from Ukraine this season. Ukraine had a large crop this year and could export near 12 million tonnes this season as compared with 4.95 million last year. Good weather for the planting season in South America was also seen as a short-term negative force but there are also weather watchers who see La Nina dry-weather trends for South America in the months just ahead. The short-term forecast has shifted to a drier trend for the next week or so. Funds were aggressive sellers for much of the session yesterday as some concerns for the Euro debt crises started the selling trend but the trend continued for energy and agriculture markets even when equity markets traded sharply higher. Rumors that a large brokerage firm may need to exit long positions in grains, livestock and energy markets if the firm needs to be sold added to the selling pressures. December corn closed sharply lower and to a 4-session low. A turn sharply higher in the US dollar and weakness in energy and equity markets sparked long liquidation selling early. Ethanol production for the week ending October 21st averaged 909,000 barrels per day. This is up 0.11% vs. last week and up 3.3% vs. last year. Total Ethanol production for the week was 6.363 million barrels which is the highest weekly total since June 3rd. Corn used in last week’s production is estimated at 96.8 million bushels. Corn use needs to average 96.3 million bushels per week to meet this crop year’s USDA estimate. Stocks were 17.29 million barrels. This is up 1.4% vs. last week and up 6% vs. last year. Taiwan is tendering to buy 45,000-60,000 tonnes of corn. Traders see weekly export sales near 775,000 tonnes as compared with 1.845 million tonnes last week.

TODAY’S GUIDANCE: The potential cut in yield for the November report is still a potential bullish force and many traders now expect some revision lower. Keep in mind; if yield slips to 146, ending stocks drop to 682 million bushels with a 5.4% stocks/usage. However, traders also see light at the end of the tunnel as far as multiple years of tightness for the corn market. If we add two million acres next year and see a trend yield, ending stocks jump to 2.26 billion bushels for the 2012/13 season with a 17.8% stocks/usage. This is why we like the July/Dec12 spread.

TODAY’S MARKET IDEAS: December corn continues to struggle to hold above the key technical point of 651 1/4 and a decisive close away from this level leaves either 675 1/2 or 618 3/4 as next target. At this point, we would still not rule out a run to 699 but we will need to see help from South America weather and a lower US yield.

Euro-Zone Optimism Keeps Equities Up Overnight

by on October 26, 2011

Stocks seems to believe the EU will get its act together. Gold however, is acting like a flight-to-quality investment.

Commodity Outlook – 2011.10.24

by on October 22, 2011

Below is an excerpt from The Hightower Report’s most recent Newsletter. To receive access to this story, with trade strategies, and our daily coverage of 16 markets, visit futures-research.com for your free 2 week trial!

The most positive thing that can be said about the global economy is that some sectors have managed to hold up against the deterioration that was seen for most of the last 4 months. Clearly the Euro zone debt crisis has been and continues to be the primary cloud hanging over consumer and investor sentiment. One only needs to look back to the negative reactions in consumer confidence to the Fukushima incident and the August US debt debate to understand that the current debt event has the potential to be a very important junction. While the US debt situation remains unsolved, the markets can be expected to trade primarily off the ebb and flow of the Euro zone crisis. In other words, internal fundamental factors are likely to take a back seat to headlines and big picture macroeconomic influences.

Since the outcome of the October 23rd EU meeting (after this writing) looks to be the dominating influence for a large portion of this week’s trade, one might expect a rather significant expansion of volatility. At stake is the latest loan of 8 billion Euros, which is only a small portion of the 350 billion Euros that Greece owes the World Bank, the EU and a long list of European banks. While the trade as of this writing was assuming something in the range of 2 trillion Euros for the EFSF, a more troublesome concern is that ratings agencies have already begun another round of sovereign debt downgrades, with Spain, France and Italy under increased scrutiny.

While recent history suggests that another “plan” won’t fully end the Euro zone debt crisis, it is possible that a euphoria window might be presented and that many markets might see an extension of the relief rallies that have already been engineered from the September and October lows. Those that are skeptical of a final and sustainable Euro zone fix (with good reason) might consider buying near to expiration, near to the money call options and buying longer dated, further out of the money put options, particularly in those physical commodity markets that are heavily tied to the recession/no recession theme.

For flight-to-quality markets or markets that could come under pressure temporarily in the wake of a favorable EFSF funding announcement from the October 22-23 time frame, one should consider buying near to the money, near to expiration puts and buying further out of the money, longer time duration calls.

From a big picture perspective, the recent slide in many commodity prices should eventually be seen as a big value play, but even if the Euro zone situation is put to rest, the markets still need to see the US come to terms with its unfulfilled promise to reduce its budget by just over 2 trillion dollars. In looking at a chart of the speculator net long position in non-financial commodities, one can see that nearly two-thirds of the peak position has already been eliminated. Another sharp slide in prices could mean that commodities will have once factor in a return to recession or worse.

In retrospect, the 4th quarter of 2011 is likely to be known as the “2 trillion” period, as the Euro zone needs 2 trillion Euros just to kick the can down the road and the US needs to reduce spending by at least two trillion to live to fight another day. In classic economic terms, the US economy continues to hold together, with a decent payroll report for September on the books, auto sales staying firm and real estate managing to avoid further deterioration. More importantly, weekly initial jobless claims figures remain close to a downside breakout (see chart), and it is possible that a period of optimism from the Euro zone could pave the way for a slight recovery in the economy and a measure of calm ahead. While it is not too late to avoid a US recession, consumer and investor sentiment will be threatened over the coming five weeks if political leaders are unable to remove the uncertainty that breeds anxiety.

Wheat: More of a Follower of Corn For Now

by on October 19, 2011

Below is a sample of The Hightower Report’s Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!

NEAR-TERM MARKET FUNDAMENTALS: While the recent USDA reports showed ample US and global wheat supply, the market continues to find some underlying support from fears of significant production declines in the US and Ukraine for the coming year “if” weather conditions remain dry in the weeks and months just ahead. It looks dry for the next few weeks in both locations. In addition, talk of the record or near record net short position of speculators in Chicago wheat has helped spark oversold condition fears and this has helped support as well. Wheat followed corn higher after early steep losses yesterday. Saudi Arabia plans to import 1.9 million tonnes of wheat this year due to rising consumption. Egypt, the world’s largest importer, plans to grow 3 million acres of wheat this season from 2.6 million last year and 2.1 million the previous year. December wheat closed slightly higher on the session yesterday with other months mixed. December KC wheat closed down 2 3/4 cents while December Minneapolis wheat closed up 10 3/4 cents. The market was under pressure early led by weakness in outside markets and strength in the US dollar but a lack of aggressive new selling plus higher trade in Minneapolis wheat helped support a strong rally from the early lows to trade moderately higher on the day. Weakness in the other grains helped to limit the advance and the market set-back to near unchanged on the day into the mid-session. Taiwan is tendering to buy 43,950 tonnes of US wheat. Japan is tendering for 102,652 tonnes of food wheat at their weekly tender. Weekly export inspections came in at 16.36 million bushels which was near the low end of trade expectations and compares with 18.4 million necessary each week to reach the USDA projection for the year.

TODAY’S GUIDANCE: Unless the winter wheat conditions in the US and Ukraine deteriorate further, wheat looks more like a follower of corn than anything else. The market is vulnerable to a short-covering trend if corn manages to push to a higher level.

TODAY’S MARKET IDEAS: Look for resistance for December wheat near 635 and 642 1/4, with 608 and 597 as support. A move through resistance would leave 688 as key resistance. Wheat looks to follow corn for now.

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