Tuesday, March 18, 2014

Corn settles into bearish trend, while liquidation looms in soybeans

By Allendale Inc.

Corn: Starting the new week, corn picked up right where last week left off. Once again, low volume trade was seen, which included no signs of fund buying. That makes three days in a row that funds have remained quiet, which now makes it a safer assumption this is going to be the new trend.

Before Monday, the sellers, especially overnight traders, who have wanted to come in and sell this market might have been worried about being run over by fund buying. Now it is likely that corn bears will not worry as much, becoming more active traders. There were overnight sales of 107,400 tonnes of corn to Mexico that offered light support to start the day.

Even with cool forecasts and small overnight sales, it is still likely that corn cannot support current prices without fund money being invested here. Those bullish fundamentals might prevent much of a slide but by themselves just aren’t enough to continue the corn rally seen to this point.

Concerns over Ukraine were somewhat eased, seeing the vote to join Russia occur with little other excitement over the weekend. It was mentioned that Ukraine is actually seeing its fastest exports of the year right now.

Bulls will continue to point out cool weather spring forecasts and regular exports as reasons to be buyers. Those bulls might want to wait for pullbacks now to get aggressive with buying as long as funds are not helping their case right now. Bears in turn should be more aggressive now, especially on bounces. March is known for seeing a corn setback during some part of the month and right now there is reason to expect one in the short term…Ryan Ettner

Soybeans: Soybeans traded higher Monday, although on very light volume as once again traders wait for any sign of Chinese cancellations. November beans settled at 1175 3/4, up 1 1/4 and May beans settled at 1391 3/4 up 3 1/4 cents. Rumors of China canceling cargos of beans from South America, which are then being diverted to the U.S., leave the market extremely vulnerable to liquidation as any talk of tight supplies would certainly take a back seat.

February Soybean crush numbers fell to 141.612 million bu.; however, still 4% over last year so demand is still sufficient enough to lend support to the market at this time. The tension in Ukraine seems to be having little effect on the markets for now. We’ll see if volume returns to normal tomorrow but any significant moves higher seem unlikely at this time…..Scott Donarski

Wheat: Wheat finished the day lower Monday as we saw a lack of new money enter the market after the recent run up in markets fed mainly by speculative liquidation of shorts and the idea of a lack of Ukrainian wheat on world markets over the next few months. The situation between the Ukraine and Russia appears to be easing slightly but concerns over a Russian invasion of Ukraine’s Eastern borders continues to underpin the market.

Much of the winter wheat is in the ground and the corn crop appears to have the potential to suffer more than wheat production. We failed to do much technical damage to the chart Monday as we failed to push new highs and also failed to take out Friday’s lows, which we would suspect would lead to some support near the 200-day moving average at the 660 area.

Dryness in the U.S. plains is still a major talking point, but we are still not at a time where a good few rains would help alleviate much of the crop stress for the hard red winter crop.

We are going to continue to remain friendly the market right now as the trend is still higher but we need to see a breakout into new highs and until we see this we would expect to see some consolidation and possibly a setback before a move to new highs.

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