Rose on Grain – US Flooding Could Significantly Alter Planting Intentions:

March 24, 2019 12:44 am
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Corn:

CME May corn futures gained 5cents on the week, settling at 378¼.  Last weekend our proprietary models (timely predictions published in our complete weekly report) predicted a finish on the week that would be near unchanged to higher, which proved to be correct.

CME corn futures traded higher on the market’s recent technically oversold condition, a modest rebound in CME wheat futures and export sales to China of 12M bu, with potentially more come.  Perhaps the most bullish sentiment on the week was due to flooding across portions of the US Corn Belt.

Net export sales for the week ending Mar 14 were higher Vs the previous sales period while shipments were very near unchanged at approximately 34M and 30M bu, respectively.  Sales were ahead of the average weekly pace required to match the USDA’s latest export projection while shipments continue to fall short of the pace requirement.  The US is 69% committed and 46% shipped Vs the USDA’s most recent target.  It continues to look as if the USDA is too optimistic regarding its most recent export projection

Domestically, it is time to plant corn across the southern US, and it will soon be time to put seed into the ground across the lower Corn Belt.  Excessively wet to saturated soils could translate into lower than originally planned corn acreage across the aforementioned areas, as well as the Mid-south and the southeastern states.  More rain and flooding are expected this week.

The annual Bloomberg survey of analysts and traders has produced an average projection of US planted area at 91.3M acres, up an expected 2M acres Vs 2018 despite weather and flooding concerns across the US.

Internationally, official estimates of production across South America continue to be mostly robust with respect to yield and production.  Weather conditions across South America are expected to be mostly favorable for safrinha production over the near-term. In Eurasia, Ukraine’s stocks have been estimated significantly higher Vs Mar 2018.

CFTC weekly Commitments of Traders data for the week ending Mar 19 (futures only) showed that the trade trimmed its aggregate net short position to approximately 380M bu, mostly through additions of long positions, while managed money firms noticeably cut their aggregate net short position to approximately 870M bu, mostly via the covering of shorts.  The spec short position remains quite large and continues to provide an opportunity for a short-covering rally.

For this week, the standard weekly technical analysis for the May contract has turned supportive while money flow remains bearish.  Slow producer selling and further potential for spec short-covering could cause the market to move higher over the near-term.  Traders will closely monitor US – China trade news, weather across the upper US Plains and Mid-west, weekly US export data and, of course, the USDA’s annual planting intentions and quarterly stocks report (all CME grains and oilseeds).  Finally – for all Ags – the Rogers index fund roll will commence on Thursday, Mar 28; scheduled roll periods often apply drag to the front month, but given the spec net short positions, this roll could be different.

Soybeans:

CME May soybean futures gave back 5½ cents on the week, settling at 903¾.  Last weekend our proprietary models predicted a finish on the week that would be near unchanged to lower, which proved to be correct.

CME futures moved lower on the week, despite mostly positive sentiments regarding US – China progress in trade negotiations.  However, flooding across the upper US Plains and Mid-west further amplified notions and concerns of greater than originally expected soybean acreage, which is troublesome given the domestic SD balance sheet’s current very loose status.

Net export sales for the week ending Mar 14 were off notably Vs the previous assay period while shipments were higher at around 15M and 37M bu, respectively.  Sales were ahead of the pace required to meet the USDA’s latest export projection while shipments again missed the pace requirement.  The US is 81% committed and 55% shipped Vs the USDA’s target.  It continues to look as if the USDA has projected US exports for 2018/19 too high.

Domestically, the annual Bloomberg survey of analysts and traders has produced average projections of US planted area at 86.2M acres, off 3M acres Vs 2018.

Internationally, most eyes were focused on US – China trade negotiations, rumors and news last week.  Still, production estimates across South America continue to stabilize.

CFTC weekly Commitments of Traders data for the week ending Mar 19 (futures only) showed that the trade flipped its aggregate net long position to a small net short of approximately 10M bu, mostly via the initiation of shorts.  Managed money firms reduced their aggregate net short position to around 310M bu, mostly via the covering of shorts.  However, the aggregate spec net short position could provide fuel for market spikes over the near-term.

For this week, technical analysis for and money flow into the May contract remain bearish, although the technical analysis is quickly approaching neutral.  The market will almost certainly continue to closely watch US-China trade talks and weather conditions across major US producing areas.  The spec aggregate net short position could provide further market support and/or spikes, especially on unexpected supportive to bullish market developments.

CME Wheat:

CME SRW May futures gained 3¾ cents on the week, settling at 466.  Last weekend our proprietary models predicted a finish on the week that would be near unchanged to higher, which proved to be correct.

Trading action last week was positively influenced by increased use and inquiry for wheat for feed, the market’s extremely oversold condition and poor weather conditions across many major US production regions.  Still, domestic and world aggregate balance sheets that are far from constructive will likely to continue to cap CME wheat futures.

Net all wheat sales for the week ending Mar 14 were modestly higher Vs the previous sales, but continued to disappoint at around 11M bu; shipments were noticeably lower at approximately 13M bu.  Sales were ahead of the weekly pace required to match the USDA’s projection while shipments continue to fall short pace requirement.  The US is 88% committed and 66% shipped Vs the USDA’s most recent target.  As with corn and soybeans, it seems as if the USDA has projected US exports too high for the current marketing year, which is quickly coming to an end.

Domestically, saturated soils and widespread flooding across the US, combined with a late spring are not doing any favors for producers of both spring and winter wheat types.

The Bloomberg survey of analysts and traders has produced an average projection of total US planted area at 46.9M acres, off nearly 1M acres Vs 2018.  As with corn and soybeans, current and near-term US weather conditions could significantly alter analyst’s expectations.

CFTC weekly Commitments of Traders data for the week ending Mar 19 (futures only) showed that the trade reduced its aggregate net short position to approximately 55M bu.  Managed money firms added modestly to their aggregate net short position, taking it to nearly 395M bu.  The aggregate spec short position continues to provide potential for market spikes.

For this week, the standard weekly technical analysis for and money flow into the May contract remain bearish, with the market now having shed its recent oversold condition.  Rumors of increased feed consumption of wheat and the potential for more short-covering could continue to support CME futures and, possibly, could incite market spikes.

Have a great week!

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This post was written by Louis Rose