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Walsh Trading's Weekly Grain Report


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February 20, 2017

March corn rallied to new highs last week, but ultimately settled the week 6 cents lower. There wasn’t any fundamental news event that triggered the late week fall, but rather the decline was a function of reduced speculative buying. Improving South American weather and a U.S. corn stocks/use ratio of 15-16% hardly argues for a net long fund position in corn. The push higher by fund managers of all asset classes speaks to an inflationary or anti-dollar investment. Longer term it will be difficult to be bullish of corn unless U.S. and world balance sheets change dramatically. Soil moisture in Central and Northern Brazil is much improved from last year and safrinha corn planting is occurring on a timely basis. Without a 2nd consecutive drought, South America’s exportable corn surplus will be boosted some 25+ MMTs (1.0 Billion Bushels). As such, the US big crop/big demand market turns into one of big crop/shrinking demand profile. As U.S. export demand deteriorates, the only real means to sustain a lasting corn rally is most likely a dire Midwest drought this summer.

Wheat futures hit new 10 month highs at mid-week but settled lower as fund buying faded. The recent CBOT rally pushed Gulf hard red winter wheat to premiums of $20-30/MT above other origins, and as such worked to slow export demand on the margin. Like corn, there’s little new fundamental input to report, but the CBOT rally was overdone and May futures are viewed as overvalued above $4.60. There are still concerns over dryness across the W Plains and across pockets of W Europe, but WX Risk the Ag weather site sees declining spring drought conditions across eastern Kansas and much of Oklahoma in the next 1 to 2 months. Without a weather premium being fed to the market, record world carryover stocks and expanded winter wheat seedings in the Black Sea should stymie rallies. The coming South American corn supplies will provide further competition for global feed export demand, and on the margin, US corn/wheat export interest will begin to slow in April/May.

Soybean futures traded within the prior week’s range and closed lower by 26 cents in the March contract. After spending weeks fretting about S American weather, the trade potentially has shifted bearish as Brazilian field yield reports are coming in much better than expected. Harvest is quickly advancing, with Mato Grosso now 52% complete, with Mato Grosso do Sul, and Goias each near 40% harvested. Even RGDS in the far south has harvested 5% of their soybean crop. The fast and early harvest is allowing for a record Brazilian export pace as U.S. shipments are now seasonally slowing. Strong exports and S American crop uncertainty has supported U.S. prices up over the last several months, but that support isfading. The U.S. planting season is now fast approaching withDelta planting now just weeks away. Given the huge new crop soy/corn price spread, new crop planting intentions are expected to show record large soy acres. Funds now hold a massive net long position in soybeans. Without major weathers issues emerging again in Brazil and more importantly in Argentina, the path of least resistance looks lower.

Technical’s read like this for this week. For March soybeans support is down at 10.21 and with a close under 10.10 is next. Resistance is up at 10.53 and then 10.74. For March corn support comes in first at 3.64 and then 3.60. Resistance comes in at 3.76 and then 3.84. For March wheat support comes in at 4.33 and then 4.24. Resistance is up at 4.56 and then 4.72.

For those interested I hold a weekly grain webinar each Thursday at 3pm. It is free for anyone who wants to sign up and link for sign up is below. If you cannot attend live a recording will be sent to your email upon signup.

Sign Up Now

For more info on Walsh Trading’s Absolute Ag Performance CTA please click on the link below:

http://christianawalsh.wix.com/bnc--cl-lusk

Sean Lusk

Director Commercial Hedging Division

Walsh Trading

312 957 8103

888 391 7894 toll free

312 256 0109 fax

slusk@walshtrading.com

www.walshtrading.com

Walsh Trading

53 W Jackson Suite 750

Chicago, Il 60604



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About the author


Sean Lusk is a registered commodity broker and Director of the Commercial Hedging Division of Walsh Trading in Chicago. Sean began in the business as a runner on the trading floor during summer breaks from college in 1993. Upon his graduation from Southern Illinois University at Carbondale in 1996, Sean began his career on the trading floor of the Chicago Mercantile Exchange (CME). Overseeing billions of dollars of transactions working as a clerk in the Eurodollar pit, Sean took the next step and became a floor broker and member of the CME in 2003. He handled customer orders for banks and investment houses from all over the world from inside the Libor pit at the CME.

Now, at Walsh Trading, Sean utilizes his experience in the marketplace and his professional client service skills to aid and assist customers in their trading endeavors.  

He writes daily and weekly commentaries focusing on both the Precious Metals and Agricultural Markets along with related market activity.

Sean has been quoted in various media outlets discussing futures markets. 

These include:

 

  • Futures Magazine
  • Reuters
  • Forbes
  • Kitco
  • Nikkei Press
  • CCTV.com

 

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