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GRAIN MARKETS: Bearish mood pushes crops close to oversold territory

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Worries about economy weigh on crops, equities and dollar.

Worries are building that President Donald Trump will be unable to accelerate economic growth, and those concerns have fueled selling in a number of markets.

The terrorist attack in London, England, near the British Parliament building added to Wednesday’s market anxiety. The attack involved a car that hit pedestrians and a knife-wielding man. The four people killed in that attack included the assailant, a police officer and two pedestrians.

The dollar is the lowest since early February, equities are a two-week low and a number of crop markets are in nearly oversold territory on charts. Crude oil was a little lower amid pressure from a bearish increase in weekly stocks.

Export highlights (USDA and Reuters data):

  • USDA said China bought 4.41 million bushels of 2017 soybeans and Saudi Arabia bought 4.41 million bushels of 2016 hard red winter wheat.
  • Japan seeks to buy 117,689 metric tons of wheat from the U.S., Australia and Canada. From the U.S. it seeks 28,500 of hard red winter and 28,600 of dark northern spring between April 21 and May 20. Results are due on Thursday.
  • Algeria seeks to buy 25,000 metric tons of optional-origin corn for April 15-30 shipment. Offers are due on Thursday.
  • Taiwan seeks to buy 98,200 metric tons of U.S. wheat for May-June shipment. Results are due on Friday.
  • Jordan bought 50,000 metric tons of optional-origin milling wheat for first-half September shipment. It paid an average $203 per ton, C&F.
  • Jordan seeks to buy 100,000 metric tons of optional-origin feed barley for May shipment. The tender deadline is Thursday.
  • Libya extended the deadline for offers in its wheat, durum and corn tender to the end of March. It seeks 100,000 metric tons of wheat, 50,000 of durum and 75,000 of corn for April-May shipment.

Corn futures closed down and near a three-month low amid pressure from the harvests in South America. The May contract finished under key moving averages and with an RSI of about 36 on the charts with 30 considered oversold.

The drop in corn came despite a small uptick in ethanol prices. A weekly energy report showed ethanol stocks dropped to their lowest in five weeks. Production slipped to a two-week low of 1.044 million barrels a day.

The rain forecast this week for the Midwest should build soil moisture for spring planting next month. The 6- to 10-day outlook also is wet for the Midwest.

The CBOT estimated Wednesday’s corn volume at 242,540 compared with Tuesday’s actual volume of 278,211. Open interest in Tuesday’s lower market increased by 3,166 with May’s up 981 and July’s up 99.

May corn closed down 2-1/2 at $3.58-3/4 and July down 2-1/4 at $3.66-1/2. New-crop December dropped 2-1/2 to $3.82.

What to Look For:  USDA’s annual planting intentions land on March 31 with fewer corn acres expected in 2017. Weekly export sales on Thursday are expected to be down from the prior week for old-crop, while estimates for new-crop sales were on either side of the previous week’s.

Soybeans settled a little lower but remained within Tuesday’s trading range and within the narrow range of the previous six days.

The South American harvests continue to weigh on the market. A new private estimate on Tuesday put Brazil’s crop at 111 million metric tons. USDA is at 108 million.

The lower market has quelled farmer selling, which has tightened supplies in cash markets. New-crop November ticked higher after China’s purchase today of 4.4 million bushels of 2017 soybeans. 

The CBOT estimated Wednesday’s volume at 134,507 compared with Tuesday’s actual volume of 175,189. Tuesday’s open interest increased by 11,623 in the firm market with May’s up 3,354 and July’s up 4,765.

May soybeans closed down 1-3/4 at 9.99-3/4 per bushel and July slipped 1-1/2 to $10.10-1/4. New-crop November was up a ½ cent at $9.98-3/4.   

What to Look For – Weekly export sales on Thursday are expected to be similar to last week’s business. USDA’s planting intentions report, based on farmer surveys, lands March 31. USDA and others have released acreage estimates in recent months and the market has dialed in forecasts for more soybean and fewer corn acres in 2017.

Winter wheat futures finished lower due to the rain forecasts this week and next week. HRW and SRW wheat futures are both the lowest since early January and near oversold levels on RSI charts

Spring wheat was the exception to the lower markets as it finished narrowly mixed with May a fraction lower and July a fraction higher.

The SRW and HRW May contracts closed below key moving averages. Last week’s CFTC report showed funds are turning bearish on the two crops. In the U.S., winter wheat is jointing and needs rain. In Kansas, the crop was rated 38% good to excellent and in Oklahoma 42%.

The 4.4 million bushels of hard red winter wheat bought by Saudi Arabia appears to be its first purchase of U.S. wheat this marketing year. That country has been importing wheat from other sources as it has discouraged its own production to preserve water. Others in the region have bought U.S. wheat this year including Algeria, Morocco, Nigeria, UAE and Yemen.

The CBOT estimated Wednesday’s soft red winter wheat volume at 94,614 compared with Tuesday’s actual volume of 109,685. Tuesday’s open interest increased by 7,739 in the lower market with May’s up 4,489 and July’s up 2,193.

Chicago’s May soft red winter wheat closed down 4-1/4 at $4.22-1/4 and July down 4-3/4 at $4.37-1/2. Kansas City’s May hard red winter dropped 5-3/4 to $4.32-1/2 and July dropped 5-1/2 to $4.44-3/4. Spring wheat for May was down ½ at $5.37-3/4 and July rose 1/2 to $5.44-1/4.

What to Look For – Winter wheat has started spring growth to put attention on condition reports from the Southern Plains.  Weekly export sales on Thursday are largely expected to be up from last week’s business.

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