Expect Strong Support to Emerge Below on New-Crop December Corn
December corn has been beaten up in the past few weeks, falling nearly 46 cents from the high made on Feb. 22. The March WASDE report featured a cut in the yearly U.S. export estimate of 75 million bushels (mb). That may still result in exports being too high, as export commitments remain down 39% from a year ago, with inspections down 38%. Also pressuring new-crop corn futures is the prospect for U.S. corn area to increase by over 2 million acres, possibly sending ending stocks up considerably to 1.8 billion bushels (bb) to 1.9 bb. However, there is plenty of planting and growing weather to endure. With the sharp fall in Argentine corn production potential, U.S. corn exports should enjoy better demand in the weeks, months to come. Momentum indicators are flashing oversold. On any drop to the $5.40 to $5.50 range, there should be buying interest ahead of the volatile seeding and growing period.MAY CHICAGO WHEAT FUTURES:
Chicago wheat futures in the past 30 days have been everyone's short leg, falling over $1.30 per bushel at one point from the high on Feb. 14. The market made a nice move higher last Friday, before falling early Monday on outside financial market woes tied to the bank failures. However, the energy and equity markets have recovered at midmorning, with Chicago May wheat rallying sharply from the low. Last week's CFTC catch-up on the Commitment of Traders report only made the numbers current as of Feb. 21. The net short of managed money funds was reported to be 47,000 contracts, but some private analysts feel that the Chicago short could be up to close to 100,000 contracts in real time. If that were the case, then such a speculative short would lay the groundwork for a sharp short-covering rally in the event of bullish news. That bullish news could come in the form of any failure to extend the Black Sea Grain Initiative. However, early Monday, traders are somewhat optimistic that the pact will be renewed by the March 18 deadline.
May soybean oil on Monday fell to 55.36, and very close to what should be strong support at the July low near 54 cents. The market is very oversold, and the fundamentals down the road support a more bullish outlook, as the capacity for renewable diesel and the use of soybean oil for production both move higher. While the pressure from outside markets on the heels of the bank failures may not be over, soybean oil demand and falling Argentine production should both be supportive for bean oil futures.
Comments above are for educational purposes only and are not meant as specific trade recommendations. The buying and selling of grain or grain futures or options involve substantial risk and are not suitable for everyone.
Dana Mantini can be reached at Dana.Mantini@DTN.com
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