Wheat futures are giving back some of yesterday’s outsized gains and corn and the bean complex follow. All in all, the wheat complex and corn are trading near February highs, while the bean complex is trading near March lows. Funds have sizable vulnerable Short positions in Chicago wheat and beans, as the USDA releases its Quarterly Stocks and Planting Intentions reports at 11 am this morning (see below). The Macro markets are not given much direction to the grain futures, but it’s interesting to note that the dollar is firming and the euro weakening as it looks like Greece and the EU will “kick the can down the road” as the current round of Greek debt negotiations ends shortly. In addition, crude oil is weaker as the negotiations between the “West” and Iran come to a close on ideas that stockpiles of Iranian crude oil will be available to the market sooner rather than later – ie sanctions may be eased soon rather than later – as Iran seems motivated to reach an agreement on nuclear plant testing in the near futures. It’s hard to tell what aspect of this morning’s report will catch the attention of the trading community. Most analysts expect some sort of surprise, but the current fundamental context is also important.
Wheat
- Bullish
- Adverse winter and spring weather could lower US winter wheat supplies
- Bearish
- Strong dollar makes it hard for US to complete in the world market
- Lots of US wheat stocks are of questionable quality – they need to find a place in the feed ration – if current weather undermines new crop quality this situation will get worse
- The US has more than abundant carryover as a percent of use
- European and Black Sea weather has been beneficial for crops and they are aggressive sellers
- Bullish
- Next year’s planted acres are expected to be smaller, but end of year carryover near unchanged; just adequate supplies
- Early planting pace is very slow o US animal numbers are increasing
- Bearish
- Much competition from Ukraine and Argentina in export market
- Strong Dollar
- Not much increase in ethanol demand and worries about weak production margins
Beans
- Bullish
- Tight carryover stocks
- Slow South American new crop shipping to date
- Bearish
- Excellent South American yields
- Many more planted acres expected
- Priced at a significant premium to corn
- China may not increase their purchases much in the coming year
- Expect next year’s carryover to be more abundant