Tuesday, March 27,
2007
888-452-8751
Fundamentals:
CBOT May corn futures resumed their pre-USDA report holding pattern
Tuesday following Monday's chart-led sell off which saw May prices
lose over 12 cents a bushel on fund selling. A lack of fundamental
news and fairly quiet outside markets left corn traders with little
incentive to push prices around. Chart-based players who dominated
proceedings Monday were also denied clear signals Tuesday as prices
on both a nearby and deferred basis kept within Monday's price
channel. Overall, therefore, corn market participants were left to
wallow on the sidelines and return their focus to Friday's USDA
planting intentions report, which should provide the first official
insight into US production prospects of the major grains markets
for the coming year. According to a recent survey, market analysts
remain divided in their expectations regarding corn planted acreage
totals, with estimates running from 86.3 million acres to over 90.7
million acres, which would mark an 8 to 12.4 million acre increase
in corn planted acres respectively over the 2006 planted acreage
total. We are leaning towards the bottom of that range, as we
remain unconvinced about the likelihood of a wholesale shift into
corn merely on the back of its strong price performance over the
past six months. There is less of a range regarding the quarterly
stocks estimate for corn as of March 1, 2007, which ran from 5.906
to 6.390 billion bushels. Again, we're expecting a figure in the
lower reaches of that range based on the strong level of export
sales the US has been seeing and the sustained usage from feedlot
managers. The trade will likely look to Thursday's weekly export
sales release for additional guidance on corn inventories and usage
levels before the report is finally unveiled. Prices over the
interim are likely to remain choppy, as few players will likely
seek to chase values too far in any direction so close to the
report, and yet many traders will no doubt seek to fine tune
positions right up to its release. Looking beyond the report, while
it is still far too early for current weather patterns to have any
real effect on final production totals, we are expecting the trade
to grow increasingly responsive to weather forecasts as the month
of April rolls on and planting in the main US corn growing states
gets underway.
Technicals:
Not available.
Recommendations:
Hedge Positions:
3-9-07: Bought December $4.00 Puts / Sell December $5.60 Calls @
~$.25
Speculative:
NONE
Soybeans:
Fundamental:
CBOT May soy futures eased 1½ cents Tuesday amid very quiet conditions. As in corn, traders lacked any news reports or technical developments to prompt greater involvement, and so remained sidelined throughout the session. In the absence of breaking news, we are expecting more of the same Wednesday. However, we are allowing for any continued corn price progress to drag the beans higher in tow, even if overall volumes remain meager in the final sessions ahead of the report. Analyst estimates for bean planted acreage run from 65.927 to 70.800 million acres, while March 1, 2007 quarterly stocks are seen coming in around 1.765-1.830 billion bushels. Our own estimates are on the high end of the planted acreage range, as we believe bean prices have remained highly competitive versus corn in recent months, while expect quarterly stocks to come in near the lower reaches of the estimates range due to the sustained strength of the export market. Soyoil/soymeal spreading sent meal and oil prices on diverging paths Tuesday, with oil scoring a gain while meal prices lost ground. However, neither market was particularly active and we expect both to remain in a sideways mode over the coming days.
Technicals:
Not available.
Recommendations:
Hedge Positions:
3-9-07: Bought November Soybean $7.80 Put / Sell November $10.40
Call @ ~$.35
Speculative:
None.
Wheat:
Fundamental:
CBOT May wheat closed down 4 cents a bushel as the market caught up
with the softer tone evident in both corn and the soybeans Monday.
Good growing conditions across many
US producer states also weighed on wheat values as expectations
grow for a decent sized winter wheat crop. CBOT May's settlement of
$4.54 a bushel is that contract's lowest since late September, and
so has certainly not done the market any favors regarding its
technical appeal. However, we feel it s unlikely that aggressive
selling interest will emerge in wheat on those grounds alone, as
most traders currently involved with these markets remain more
focused on corn and soybeans and less interested in near term wheat
price direction. As a result, we are expecting wheat values to
continue chopping around on a largely sideways heading until the
report finally kick-starts a pick up in activity across the entire
grains arena. Analyst estimates for the quarterly stocks report
range from 857 to 901 million bushels, and we are expecting the
figure to emerge in the 890 million area as exports have lagged the
year-ago pace while global output has expanded. Winter wheat
planted acreage estimates run from 43.489 to 44.300 million acres,
while total wheat planted acre estimates range from 58.900-60.493
million acres.
Technicals:
Not available.
Recommendations:
Hedge: None
Speculative:
NONE
Livestock:
BEEF...Live
cattle futures sold off hard today under the weight of heavy fund
type selling. The floor trade was eager to jump on the sell side,
electing large numbers of sell stops as the board chewed through
multiple layers of support. The outside fundamental news was quiet
today. However, many traders are speculating that the top is in
place, mostly fueling off the idea of poor beef demand. The idea is
working off the theory that beef packers will begin to cutback on
the kills, although there is no evidence of such. Today's kill was
pegged at 123,000 compared to 121,000 last year. The closing beef
report showed the choice cutout down .92 at 155.47. Movement was
moderate to good at 183 boxes and 65 trim.
PORK...Lean hog futures pushed back and forth on Tuesday, closing
slightly lower across the board. The board continues "to feel" like
a market in transition. Traders seem to be covering shorts and
establishing some length off the idea that hog supplies are about
to tighten on a seasonal play. There is little evidence of this
with today's kill pegged at 412,000 compared to 392,000 last year.
Tonight's pork cutout was up .14 at 64.77. The pork seems to be
holding well given the level of aggressive slaughter. Anticipate
increasingly good support in the summer hogs on weakness from
today's settlements. Cash hogs are called fully steady to firm for
Wednesday AM.
Recommendations:
Hedge:
None
Speculative
Positions:
None.
