The Grains Review For the Week of March 5, 2012
Posted in the Day Trading Forum
“Pitguru Is Futures Trading”
Since: Jul 11
#1 Mar 5, 2012
On Friday markets saw a very messy trade. Early weakness in corn and wheat was erased as both followed beans to the upside. On the close, wheat popped to daily highs as positive floor momentum and strength in KC and Minny helped support the trade. This feels more like short covering (backed up by losses in OI) than anything on the fundamental side so I do not look for momentum to continue in Chicago where as KC and Minny have some reasons to continue higher as demand and weather remain issues. KC remains an unknown with the HRW crop sure to experience problems if below average precipitation and above normal temps persist through March. The SRW crop should have far fewer problems if the drought monitor is believed. Minny is again bullish due to commercial receipt ownership and talk of acreage losses to Canola and other small grains in northern regions. The acreage war in northern states should be a hell of a show this year with vegetable oil crops moving in on historical wheat land. Talk of corn seed delivery problems from DeKalb in the Dakotas adds to the issues in that region heading into the planting season. Corn saw a tighter trade in CN-Z and a move to an inverse in CH-K. The latter speaks bullish for corn but crude and a weak Euro kept the market in check. Flat price remains stuck in the established range looking for a catalyst that traders probably won’t get on the WASDE report this Friday. No corn receipts out there offers more momentum to CH-K but time is running out to see this spread move. I cannot favor a higher bias in corn due to improved conditions in Argentina, weak demand from China and a wetter 30-day forecast for the northern plains and IA. This 30-day forecast was offered by Elwin Taylor of ISU on Friday during the session. This was the only area of concern preplanting so what is the upside catalyst from here? Beans saw good strength in SN-X closing the week at 42 but if this market is so bullish and there are no receipts out there why is SH-K trading at a 5-cent carry? I cannot make heads or tails of that situation. It points to a money flow issue more than a fundamental supply side rally. Demand is quiet and basis is flat to soft not backing up the bullish sentiment. Another factor on Friday was oil share blowouts with meal gaining heavily against oil. There was blood in the water early but FC Stone helped support the trade easing damage into the latter part of the session. Volume was light across the board not helping my interest in following the well over extended rally.
I have been bearish for a while believing this market needs to take a breather before a next possible leg higher. I believe late comers normally portend the end, not the beginning of a real rally. The market does have small issues right now but with S. American harvest and a steady USD there is little to feed the bull so look for more profit taking ahead of the expected dud USDA report. Any change in the Greek debt situation will directly impact the agricultural market so focus there for best macro direction.
The overnight session saw minimal activity with Cotton the biggest feature. Cotton moved limit higher on the Indian export ban. India stated a need to secure domestic supplies before they can authorize exports. No timeline has been set in place. EU wheat was modestly higher following Friday’s momentum more than anything seen via the overnight trade. Fresh demand is quiet after Syria passed on a tender for 100K milling wheat.
Coming back from the weekend the trade is mixed to higher with corn and protein wheat leading modest upside momentum. Weekend rains were disappointing for some in Brazil and Argentina putting bears on notice this week as traders move into the WASDE report on Friday. Domestic weather offers nothing bullish with southern planting moving along well while northern snows fall in the eastern Dakotas. Coming from Twitter contacts (Thanks Kyle), Shreveport LA should be done this week with high hopes for a good start.
“Pitguru Is Futures Trading”
Since: Jul 11
#2 Mar 5, 2012
South American weather looks wet in central Argentina today and tomorrow offering good chance for beneficial rains. Southern Brazil is dry through the end of the week putting stress back into the crops there. Recent rains in Mato Grosso have stalled harvest only slightly with Brazil still ahead of historical pace. Nothing compelling in either direction to help break the back of bulls or blow bears out of the water.
The week should start quietly but there is no doubt in my eyes that traders will see fireworks this week. The big question is which direction? Do these markets see profit taking ahead of the report? Do they see old/new spreads back up as demand wanes and basis fades? Do they see a fresh flow of money into the trade looking for one last leg higher? Does the Euro collapse under the weight of extreme debt or will another German led bailout save the day? Will crude maintain the Iran/Israel war premium or will the Iraq export news curb momentum there? Are current Argentine rains viewed as positive or negative by the trade? Will today’s export inspections support the front end or foreshadow a pullback? These are just a few questions I am addressing this week ahead of WASDE on Friday morning.
Disclaimer: Past performance is not indicative of future results. Trading futures and options involves substantial risk of loss and is not suitable for all investors. Fundamental factors, seasonal and weather trends, daily news, and other current events may have already been factored into the markets. The use of stop loss or contingent orders may not protect profits and may not limit losses to the amount intended. Certain market conditions make it difficult or impossible to execute such orders.
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