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GRAIN MARKETS: Rainy forecast is gloomy for wheat market

Late short covering firms corn, while soy sinks.

Winter wheat markets closed lower for the fourth straight session as forecasts put widespread rain in the central and southern Plains this week.

Late short covering helped corn futures recover to close with fractional losses, while soybeans finished lower and in oversold territory on technical charts.

Funds have been selling the crops and entered the week net short for corn and soft red winter wheat. They also had reduced their long positions in hard red winter wheat and soybeans.

Attention remains on Friday's U.S. Department of Agriculture planting and grain stocks reports. The Farm Futures survey released last week concluded that farmers intend to plant 90.3 million acres of corn, down 3.9% from 2016; 89 million acres of soybeans, up 6.6%, and 45.8 million acres of wheat, down 8.7%. A Bloomberg survey of analysts had a corn acreage average of 90.9 million and a soybean average of 88.3 million. In 2016, farmers planted 94 million acres of corn and 83.4 million acres of soybeans.

Export highlights (from USDA and Reuters):

  • South Korea bought 55,000 metric tons of soybean meal, which will likely be sourced from South America. Shipment will be June 11-30.
  • Jordan is tendering to buy 50,000 mt of optional-origin wheat for shipment from mid-September to Oct. 31. The tender closes March 29.
  • Jordan seeks to buy 100,000 mt of optional-origin feed barley for May- June shipment. The tender closes on Tuesday.
  • Algeria seeks 50,000 mt of durum for shipment in the second half of May. The tender closes on Tuesday.
  • Libya extended the deadline for offers in its wheat, durum and corn tender to the end of March. It seeks 100,000 mt of wheat, 50,000 mt of durum and 75,000 mt of corn for April-May shipment.

Corn futures settled a fraction lower and appear to be trying to find some stability after recent losses. The May contract remains just above oversold levels on technical charts.

Funds entered the week net short for corn, and Friday’s Commodity Futures Trading Commission (CFTC) report showed that they added shorts through Tuesday of last week. Global supplies are ample, and Argentina and Brazil are harvesting corn now.

Rain in the forecast this week and next for the Midwest should continue to build soil moisture for spring planting next month. The 6- to 10-day outlook and the seven-day outlook are wet for the Midwest.

The Chicago Board of Trade (CBOT) put Friday’s actual volume at 188,280. Open interest in Friday’s flat market decreased by 20,639, with May down 28,598 and July up 3,961.

May corn closed down ½ at $3.55-3/4 and July down ¼ at $3.63-1/2. New-crop December closed up ½ at $3.80.

What to look for: The planting intentions report next Friday is the next big event on the calendar and may support new-crop months. The grain stocks report, also on Friday, is expected to confirm ample supplies, with Farm Futures expecting 8.54 billion bu. versus the year ago level of 7.82 billion bu.

Soybeans settled at a 4.5-month low on continuous charts, with May inching into oversold territory on charts.

Weekly export inspections of 20.4 million bu. were down from a week ago but matched trade forecasts and easily topped the pace needed to meet USDA’s annual forecast.

Funds entered the week net long but have been exiting those positions. Friday’s CFTC report showed that funds trimmed their net long by more than 34,500 contracts as of Tuesday.

Brazil's harvest continues to overhang the market, and drier weather there should aid the harvest. A private estimate last week put Brazil’s crop at 111 million mt. USDA is at 08 million.

The Buenos Aires Grain Exchange last week raised its estimate for Argentina soybeans to 56.5 million mt from 54.8 million. USDA is at 55.5 million.

CBOT put Friday’s actual volume at 189,692. Friday’s open interest decreased by 1,274 in the lower market, with May down 3,379 and July up 846. November’s open interest rose 886.

May soybeans closed down 4-1/4 cents at 9.71-1/2 per bushel and July down 4-1/2 at $9.81-3/4. New-crop November dropped 6 to $9.71.

What to look for: Farm Futures pegs soybean stocks in Friday’s report at 1.695 billion bu., while the Bloomberg survey averaged 1.676 billion.

Winter wheat futures finished mostly lower following the weekend rain and forecasts for more this week. Both Chicago, Ill., and Kansas City, Mo., winter wheat was nearing oversold territory on charts, with RSIs in the mid-30s.

The 6- to 10-day outlook also favors rain for that region. Winter wheat is jointing, and its condition declined earlier this month because of dry conditions.

Weekly export inspections of 19.9 million bu. were down from the prior week but within trade forecasts. They were short of the pace needed to meet USDA’s annual shipment forecast. The Philippines took the most wheat in that report.

CBOT put Friday’s actual volume at 85,109. Friday’s open interest decreased by 1,667 in the higher market, with May down 5,224 and July up 2,651.

Chicago soft red winter wheat closed down 4 cents for May at $4.20-3/4 and down 4-3/4 for July at $4.34-3/4. Kansas City hard red winter wheat dropped 6-3/4 for May to $4.21-1/4 and dropped 6-3/4 for July to $4.34-1/4. Spring wheat for May slipped 2-3/4 to $5.33, and July dropped 2-3/4 to $5.39-3/4.

What to look for: For March 1 wheat stocks, Farm Futures has 1.614 billion bu., and the survey has 1.627 billion. A year ago, stocks were 1.372 billion bu.

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