U.S. wheat futures are poised to start Tuesday's day session modestly higher in a rebound from a heavy sell-off. The markets are due for a bounce, as losses were a bit overdone Monday. Wheat futures tumbled Monday on profit-taking and a lack of support from the nearby Minneapolis Grain Exchange contract (which failed to lock limit up as it did in recent sessions).
Scattered demand news also was seen to be slightly supportive for wheat Tuesday. Jordan said it was tendering to buy 100,000 metric tons of hard wheat. And the Turkish government said it had mandated the state-owned grain board to import 700,000 metric tons of wheat by the end of May 2009, according to a report. (Turkey's wheat production may fall 30 % in 2008, if a drought continues.)
The potential for rain in hard red winter wheat areas of the U.S. plains is seen as a little bearish. This appears to be the best chance for widespread rain through the wheat belt since the above average December rains. It might still not do much in the west, but it at least has a chance. After the short range period, the long range now looks drier again-so if they miss this chance, it might be a while before there is another one. The U.S. Department of Agriculture (USDA) said Monday that 45% of the country's winter wheat was in good to excellent condition as of Sunday-down from 64% a year earlier. Traders are waiting for the USDA to release updated supply and demand numbers in a report due out at 8:30 a.m. EDT Wednesday. The average of analysts' estimates for 2007/08 wheat carryout is 261 million bushels-up from 242 million in March.
A quiet news front in the soybean complex and a lack of leadership from outside markets is seen promoting a choppy trade in the soy. The uncertainty surrounding the government report on Wednesday is seen to be producing some cautious trading activity-with traders unwilling to take on added risk, particularly with a wide range of estimates on ending stocks from an analyst's survey.
As mentioned, the USDA is scheduled to release its April supply and demand estimates Wednesday at 8:30 a.m EDT. The average of analysts' estimates peg 2007/08 soybean ending stocks at 157 million bushels, up from the March estimate of 140 million. (The estimates ranged from 120 million to 180 million bushels.)
In other news, Argentina's embattled economy minister, Marin Lousteau, is ready to offer concessions to protesting farmers in this week's talks. But people close to him insist he has no plans to reverse the soy tax increase that prompted a destructive three week strike last month. It is critical to get this resolved, as more grain comes to South America's ports this week than any time of the year.
Corn is all about weather, weather, and weather. So far, widespread snow, rain, and thunderstorms are further delaying spring fieldwork. Tuesday's government report is expected to lower 2007/08 ending stocks by about 135 million bushels to 1.303 billion. Many analysts expect an increase to the feed and residual number in light of a lower-than-expected stocks report as of March 1. Goldman Sachs has a trade recommendation to buy CZ9. That is good enough for us. Consider buying December 09 Corn at 546. Currently, it is trading at 559.
The risk of loss in trading commodity futures and options can be substantial. Before trading, you should carefully consider your financial position to determine if futures trading is appropriate. When trading futures and/or options, it is possible to lose more than the full value of your account. All funds committed should be risk capital. Past performance is not necessarily indicative of future results.
