Following a week of massive China buying of U.S. corn, the spot futures month of March rose to a new contract high. A look at the monthly continuation chart, which reflects the front month, suggests March corn could be headed for the $6.00 level.
China came in last week and bought a huge 240 million bushels (mb) of U.S. corn, with Friday's 2.108 million metric ton (mmt) (83 mb) purchase of U.S. corn the second largest on record. Following last week's sales, which were comprised of 230 mb of corn to China, and more sales to unknown, the U.S. export projection is likely too low by 200 mb to 400 mb.
Although daily and weekly charts on corn are showing signals of being overbought, there is really no solid resistance on March corn until it gets close to $6.00. The rise to $6.00 or above is unlikely to happen all at once, with funds long a record amount of corn. With U.S. corn ending stocks on a path toward 1.2 to 1.2 billion bushels (bb) of corn, look for that challenge of $6.00 to occur on either March or May futures. U.S. corn is the cheapest feed grain into late spring.
March Soybean Oil:
As in corn, soybean oil has been in a bull market with the world vegetable oils rally. A look at the monthly oil chart following the new contract high set last week shows the next area of major resistance up near $.49 to $.50. Expect that area to provide much trouble for spot bean futures, with more resistance up near $.51 to $.52.
However, on the daily chart, soybean oil has been showing some signs of a tired bull market. With managed money funds showing a net long of close to 105,000 contracts as of last Tuesday, the road higher will not be a straight shot. With the U.S. soybean market likely headed for a much tighter ending stocks number as demand continues to be record large, it's not a question of if, but when bean oil moves to that resistance. U.S. soybean oil remains one of the cheapest minor vegetable oils in the world market.
March Chicago Wheat:
The wheat market has corrected lately, but remains in a solid uptrend, and bullish news out of Russia has them raising their export tax on wheat to a prohibitive 50 euros ($1.65 per bushel). The tax, which takes effect on March 1, will likely shift some export business back to the U.S.
March wheat looks to have major support at $6.30 to $6.40 and major resistance up near $6.90. Unlike the corn market, wheat is not over-bought and funds are holding only a minor long position. With Russia and Ukraine limiting exports, and with rumors that Argentina could be close to raising the wheat export tax there from $12/mt to $20/mt, U.S. wheat should be well positioned to garner some extra export business.
Comments above are for educational purposes and are not meant to be specific trade recommendations. The buying and selling of grain and soybean futures involve substantial risk and are not suitable for everyone.
Dana Mantini can be reached at Dana.Mantini@DTN.com
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