by Chris Kimble
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Several popular U.S. stock index's are at or near all time highs. Of late the Russell 2000 just broke above a 15-year resistance line. Now we will soon see if the Dow, NDX, NYSE and Wilshire 5000 follow suit.
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The attempted breakouts are taking place with valuations 66% above the 114-year average valuation line.
by allendale
Corn:
Supply/Demand: The only change made to USDA’s balance sheet was a 25 million bushel increase for exports. This certainly fits with our viewpoint as we were already ahead of USDA’s February 10 expectation even before Ukraine problems developed. Now, with the US picking up some of that business that would normally go to Ukraine, you can make a good argument for higher exports. Ending stocks were lowered from 1.481 billion to 1.456. USDA left the corn for ethanol and feed/residual numbers unchanged. Much of the grain trade, and certainly Allendale, warns not to get too bulled up on today’s report. USDA’s feed/residual numbers are far too optimistic with their current estimate implying a sharp 22% increase over last year. We expect that optimism to be corrected on the April report.
World Numbers: USDA chose to leave both their Brazil and Argentina corn production estimates unchanged at 70 million tonnes and 24 mt respectively. World ending stocks were raised from 157.3 mt to 158.5. This is still an increase over last year’s 135.
Price Expectations: Today’s ending stock number implies $4.65 prices. The market is holding additional premium due to the Ukraine situation. The next piece of news ahead will be the March 31 Prospective Plantings and quarterly Grain Stocks reports. Allendale’s official bullish upside target was filled last week. We are now neutral and preparing for a move to $3.50 for the December contract after planting/development.
Soybeans:
Supply/Demand: Ending stocks were lowered slightly, from 150 million bushels to 145. While USDA did increase exports by 20 million bushels, that was partially offset by a 10 million decline for domestic crush and a 5 million increase for imports. The trade will now get concerned that USDA may manage ending stocks like last year. During that time ending stocks were left unchanged from February through September.
World Numbers: The decline posted for Brazil soybean production, from 90 million tonnes down to 88.5, may not have been enough for bullish expectations. Argentina production was left unchanged at 54 mt. World soybean stocks declined from 73.0 last month to now 70.6. This is still an increase from last year’s 58.
Price Expectations: Our bullish price target for old crop soybeans was filled weeks ago. There is just a little left to fill our $12.15 target for the November. As the trade will begin debating soybean plantings in earnest now, we expect sharply lower prices after planting. We feel USDA’s Ag Forum estimates, released in February at +3 million, to be sharply increased after this month’s survey. Our downside target is $9.25 for November.
Wheat:
Supply/Demand: USDA made no changes to the wheat balance sheet. The trade was expecting them to increase their stock estimate from 558 million bushels up to 570. We are currently behind USDA’s export sales estimate.
World Numbers: Ending stocks were raised slightly, from 183.7 million tonnes to 183.8. USDA raised their Australia production estimate from 26.5 mt to 27.0.
Price Expectations: Our bullish upside targets were filled last week. After planting, our eventual downside targets are $5.26 and $5.07 for July and December Chicago futures.
By: Paul Georgy
Now that the March USDA report is out of the way, trade will begin to focus on the March 31st Quarterly Stocks and Prospective Plantings report. Allendale is expecting usage to be down in the second quarter which could mean an increase in corn ending stock by 200 to 300 million bushels.
NASS said the wheat crop good/excellent ratings improved in TX and KS while OK fell by 9% from last week.
Weather conditions have improved across the Midwest which is providing opportunity for farmers to move grain. Corn and soybean basis was lower yesterday afternoon.
Reuters is reporting that Syngenta AG is halting commercial sales of GMO Duracade in Canada because the product lacks approval in China.
There is talk that China may have cancelled up to 15 cargoes of soybeans out of Brazil. The question remains when will they cancel US purchases due to the back up of soybeans in China’s ports.
Funds are estimated to have sold a net 14,000 corn contracts, 6,000 wheat contracts and 12,000 soybeans contracts on Monday.
Chart watchers are now talking of possible seasonal tops in the grain futures. The May contract of corn has fallen back under the 200 day moving average. Soybeans and wheat are near support levels that, if broken, may cause long liquidation. Stay in touch with your Allendale Broker.
Can hog prices equal cattle values? This past weekend there were pork researchers suggesting summer hog supplies could be down as much as 12 to 15% from a year ago during summer months due to PEDv. When combining the loss of pork, beef and poultry production in yesterday’s USDA production report, it suggests meat supplies will be tight for several month. Lean hog futures continue to rise on tight supply concerns and fund and spec buying. Pork cutout values are up 2.95 to 114.94.
Beef values continue to strengthen which helps to improve packer margins and stabilize fed cattle values. Market ready supplies remain tight however as fed cattle numbers should increase going into June as suggested by recent Cattle-on-Feed Reports. Beef cutout was sharply higher on Monday with choice up 2.88 and select up 3.12. CME Feeder Index is 173.34.
by Greg Harmon
Technical Analysis is best noted for looking at previous price action to see where a stock might encounter some resistance or support based on past history. This can either be from actual price battles at those levels or naturally pleasing ratios (Fibonacci ratios) on partial retracements. But when price reaches new highs that all can become useless and new forms of Technical Analysis are needed to project higher.
The chart below looks at 3 different projections that intersect at the same spot in the SPDR S&P 500 ETF, $SPY, at about 204. The first two are using Andrews’ Pitchforks. The SPY is fast approaching the Upper Median Line (UML) of the green outlined Pitchfork that goes back to the October 2002 low. The SPY is also riding the purple Median Line (ML) of the smaller pitchfork higher, not straying outside of the yellow area. No where near the mid line between that and the Upper or Lower Median Lines. Price does not have to continue on these paths, attracted to the green UML and riding the purple ML, but if it does they will cross at about 204. What makes that point a little more interesting is that it is also important to the AB=CD harmonic formation. You can see without measuring that the CD leg is already longer than the AB leg, but the CD leg often extends at a Fibonacci ratio. In this case as drawn, the D point at about 204 would be a 138.2% extension of the AB leg. Three ways to build a mosaic that reaches 204. This means that 3 different types of traders with 3 different timeframes will be looking at that level as significant. Shouldn’t you too?
by Doane Advisory Services
Corn still seems to be suffering from the WASDE report. Although Monday’s USDA report seemed supportive of U.S. corn prices, it also boosted the global carryout forecast significantly. That development, along with the negative bean data, weighed upon CBOT futures yesterday and again last night. May corn slipped 1.0 cent to $4.7725/bushel Monday night, while December sagged 1.0 to $4.77.
The soy complex remained weak in early Tuesday trading. In its monthly WASDE report Monday the USDA cut its forecasts of the Brazilian soybean crop and domestic carryout predictions less than was generally expected. The large drop that followed apparently had a significant technical component in the wake of recent gains, so the overnight follow-through wasn’t terribly surprising. May soybeans declined 4.25 cents to $14.145/bushel early Tuesday morning, while May soyoil bounced 0.07 cents to 43.93 cents/pound, and May soymeal slid $0.8 to $443.9/ton.
The wheat markets moved mostly higher Monday night. Yesterday’s WASDE report actually seemed supportive of the wheat outlook, since the USDA did not raise its forecast U.S. carryout as many expected. However, bulls in the golden grain markets seemed to throw in the towel as beans lead the crop markets lower. Traders cited long-liquidation in the wake of recent gains. Thus, the overnight bounce makes sense, with bulls looking for a resumption of the preceding rally. May CBOT wheat futures edged up 1.5 cents to $6.4225/bushel as Tuesday dawned over Chicago, while May KCBT wheat futures were flat at $7.1125, but May MWE futures lost 1.75 to $6.91.
Cattle futures proved mixed again Monday night. Despite continued wholesale strength and a sizeable discount to cash prices, the nearby April cattle contract proved surprisingly weak Monday. Traders seem worried about beef sticker shock amongst consumers this spring. Summer futures rose yesterday, but flattened overnight. The April futures also reversed its slip, rebounding moderately this morning, possibly to renewed cash optimism. April cattle futures bounced 0.27 cents to 143.42 cents/pound early Tuesday, while August stalled at 134.45. Meanwhile, April feeder cattle sank 0.02 cents to 175.70 cents/pound, but August inched up 0.02 to 178.02.
Hog futures sustained their massive rally in early Tuesday action. Talk of sharply reduced hog supplies this spring and summer, along with surging cash and wholesale values powered Monday’s big hog advance and continued doing so overnight. The rally could reverse at any time, but shows no sign of doing so at this juncture. April hogs jumped 1.10 cents to 117.10 cents/pound in pre-dawn Tuesday trading, while June soared 1.30 to 124.80.
Cotton futures are weak after floundering Monday. Yesterday’s USDA data indicated improved U.S. fiber exports and lower ending stocks this year, which might easily have powered ICE cotton futures higher. The fact that the New York market could manage only very modest gains implies underlying weakness, so few in the industry can be particularly surprised by the overnight slippage. May cotton dipped 0.30 cents to 91.26 cents/pound just after sunrise (EDT) Tuesday, while December cotton tumbled 0.32 cents to 79.46.
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