Rally continues after correction?

3/11/14 — Grains continued to rally today after a sharp setback yesterday with wheat pushing to new 4-month highs and corn gaining back half of Monday’s losses. New crop soybeans also pushed to new recent highs, but old crop soybeans continued to suffer from selling today after sharp losses yesterday. Could China finally be shifting purchases to new crop from old crop months?

There was a crack in the bull market Monday, with the USDA March report out that was not really a bearish report, but the market sure reacted that way. In fact, the USDA report came out with mostly friendly news (-25 mb corn stocks, -5 mb soybean stocks, -1.5 mmt Brazil soybean production). World ending stocks of soybeans were cut to 70.64 mmt from 73.01 mmt last month (also bullish), but corn stocks were hiked to 158.47 from 157.3 last month, and wheat hiked to 183.81 mmt from 183.73 mmt last month. The rise in corn world ending stocks surprised the trade, and down we went! Soybean lost nearly 40c on old crop months, and corn/wheat was down 10-13c. That terrible performance make market bulls wary, but the follow through wasn’t there as today the market gained back all losses in wheat and new crop soybeans (plus some), and recovered half the losses in corn. It was only the old crop soybeans that continued to suffer.

Probably the biggest numbers anticipated by the trade will come at the end of this month, when stocks and intended acreage in the US will come out. USDA will use these numbers for acreage until the July USDA report, with planted acreage not actually reported until the end of June. There are lots of numbers bantered around for these numbers, but the main attention will be on the share of acreage between corn, soybeans, and HRS wheat. It’s likely that we will see from 3-4 million acres more soybeans in 2014 (or more), and most of that acreage will come from corn. But what will happen to the 8.8 million acres of prevent planted ground might yet be up in the air, and that might be the critical question yet to be answered by the trade.

Weather continues to improve for the crops, with drier weather throughout Brazil forecast the next week which should allow more harvesting of grains there and planting of second crop corn. US weather is also offering a bit of a warmup the next week in the western corn belt, with snow melting rather quickly now and opening up the possibility that this spring won’t be so late – at least in the western corn belt. The 8-14 day forecast also improves with warmer temps and less precip. This is starting to straighten out from the cold/wet forecast of the past few months and our bitter winter weather, and that is encouraging as we approach spring planting.

If the market can continue its recovery, we may be able to push towards the $15 mark in old crop soybeans, $5.40 nearby corn futures, and $6.72 for nearby Chicago wheat futures (which March futures were within 1/4c today). These should be considered targets for advancing sales in old crop contracts. For new crop markets, $4.97 December corn and $12.06 November soybeans are some targets which if reached would represent some sales opportunities for producers.

Pro Ag has been looking for a rally from January of this year into spring, and we have actually had a little stronger rally than we expected into March. Lets hope this rally can continue, but the outlook for new crop harvest prices is not good compared to current price offerings. It’s likely once this spring rally is over, we will need to be aggressive sellers of grains of all kinds (wheat, corn, and soybeans) to end up with some profit in 2014.