Chicago Agriculture Commodities Finished Lower on the Week Friday

Chicago Agriculture Commodities Finished Lower on the Week Friday

$CORN, $WEAT, $SOYB

Chicago Board of Trade (CBOT) agriculture grains futures finished lower or the week which ended 24 February, mostly on favorable South American growing conditions.

CBOT Corn futures settled lower for a 2nd week running. New Bullish fundamental input remains lacking, and this week’s trade was plagued by both the United States Department of Agriculture (USDA) and ongoing favorable South American growing conditions.

The USDA’s Outlook Forum this week featured US new crop acreage at 90-M, below expectations but unchanged from the baseline release, but end stocks will remain in excess of 2,000-M bu assuming trend yield.

Agriculture analysts hold that the loss of world market share beginning in mid-2017 is just as important as US acreage, and indeed South American crop size estimates suggest a massive rebound in South American exports beginning in Jun/Jul.

Argentine crop estimates have been inching higher, and rainfall across the heart of Brazil’s safrinha corn belt will be near 2X that of a year ago. All indications point toward a South American exportable surplus some 22 million tonnes higher than in MY 16/17, and it’ll be difficult for the US to compete.

Note that Gulf basis for May/Jun is at a multi-year low, yet Argentine offers are still 0.10 bu cheaper. Most agriculture analysts’ strategy remains to use rallies to advance forward cash sales.

Wheat followed Corn South last week and aside from ongoing concern over dryness across the Southern and Western US Plains, fresh news is lacking. Most importantly, the multi-week rally in Black Sea cash prices seems to have paused, and interior Russian values are again weaker.

Even in USD terms, domestic Russian wheat in key areas of the south are down 3-4 dollars per tonne on the week, and down 5 dollars per tonne from a peak in early February.

Without firm cash markets, the US market is left to trade massive end stocks and a lack of needed demand. Recall the Australian crop was raised last week, and Argentina’s Agriculture Ministry this week suggested their crop could be as high as 18-M tonnes, Vs. the USDA’s projected 15-M tonnes.

Southern Hemisphere exports through Spring/Summer will be record large, and as stock estimates continue to rise in Russia, analysts expect rallies through Summer to be limited to periodic short covering events.

A close eye will be kept on world weather, and it is April and May that are the Key 2 months in determining world Wheat yields, and whether another record large crop is developing. World Wheat farmers will be shedding old crop supplies into Spring.

Soybean slipped lower through the holiday shortened trading week, with the market under pressure rising yield expectations in Brazil and then larger than expected new crop acreage estimates from the USDA.

Fundamentally, US Soybean stocks are record large while export demand is now quickly being shifted down to Brazil. The Jan-Feb Brazilian Soybean export pace will be record large, and shipment totals look to gains speed into April.

Technically, spot futures fell back to trend-line support, with May Soybean dropping back to the contract’s 200-Day MA.

Agriculture analysts’ view has turned more Bearish as the Brazilian harvest advances and yields exceed expectations.

The USDA estimates that US farmers will raise their Soybean acreage by 4.6-M acres to a record large 88-M. Spot futures need to hold against 10.00 or risk a deeper decline to 9.50.

Have a terrific week

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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