Afternoon Grain Market Recap

By: Jeff Kaprelian –

Grains fell as technical continuation in soybeans led everything lower. Forecasts have improved slightly for Argentina, and it seems that traders don’t want to be long over the weekend in case the forecast sees continued improvement.

Informa lowered their estimate of Argentina’s soybean crop to 51 million metric tons. This compares to the previous USDA report of 56 million. Analysts polled by Bloomberg come in at an average of 53.8 MMT for Argentina. We think the USDA will be a bit more cautious and submitted our estimate at 54.7.

Continuing with the Bloomberg estimates, analysts see Argentina’s corn down to 42 MMT. Brazilian corn is expected to fall to 93.3 MMT, while soybeans should rise to 111.5 MMT. According to Zacks investment research review, stocks for corn are expected to fall to 2.467 billion bushels while soy stocks are expected to rise to 487.8 million. Wheat stocks should remain fairly steady at 987.8. We agree that corn stocks should fall and soy stocks rise based on recent export sales data.

The stock market took a hard fall today with the S&P futures falling 65.25 and the Dow down 743 points at the time of writing. This came after a stronger than expected jobs report cleared the way for further interest rate hikes. Consensus is the Fed will raise rates four times this year instead of the originally anticipated three. We believe a correction in the stock market is ultimately healthy, and feel the S&P can possibly bounce on support near the 2700 level.

March corn settled 0’2 lower at 361’4. We continue to assert the market should pull back to correct the overbought technical conditions. 353’0 to 355’0 is the likely support area. We’d need to stay there for a few days in order for the indicators to work into an oversold position, but that isn’t necessarily a requirement of a continuation of the rally.

Soybeans fell 6’2 in March to 978’6. We are now testing the 200% channel extension I’ve talked about in the past, so there is potential for this area to hold as support. Perhaps a more likely downside target is 970’0. We’re right in that time of year when the soybean market picks up, so we advise looking at these pullbacks as buying opportunities.