Private production projections are bearish. Traders expect increased harvest inventory: 3 billion bushels of wheat, 3.5 billion bushels of soybeans and 15 billion bushels of corn.
Cattle and hog prices pulled back last week. Rising dollar values cut into sales. Expect feed demand to stall temporarily.
Traders have a large commitment to the buy side of cotton markets. These positions are vulnerable to profit taking whenever economic news is negative.
Bullish news: USDA weekly export sales for last week exceeded the 225,000 bale trade estimate. Combined bookings were 285,200 bales.
Negative economic information failed to pressure cotton prices below the trading range. Fundamentals are taking control of market sentiment. World supply is declining as demand increases with economic recovery. Cotton technical charts are pointing higher. Keep in mind that technical charts are a short term indicator and usually last a week or less.
Bearish news: Cotton technical charts turned bearish last week but technical charts are a short term indicator. Debt problems in Europe and higher interest rates in China are both price negative. China is tightening the money supply to slow inflation. The strong dollar continues to be a background factor.
China is now estimated to increase cotton production a million bales. Cotton planting conditions are nearly ideal in the United States. Cotton planting is near average in the Delta after recent rain delays.
Bearish news: U.S. new crop plantings progressing well. World soybean supply is the second largest level on record. Thirty percent of U. S. soybeans are planted where 22 percent is average. Soybean acres estimates were increased 400,000. Chinese soybean futures on the Dalian exchange were 6 cents per bushel lower.
USDA weekly export sales were 492,300 tons. That was lower than some trade estimates, particularly the new crop number of 209,100 tons. Old crop bookings included 150,000 tons to China. Soy oil and meal prices turned lower. May deliveries were 358 contracts of soybeans, 0 for soy meal, and 222 for soy oil. Commercial traders are 168,000 contracts on the sell side of soybean markets.
Bullish news: USDA estimates for U.S. soybean ending stocks have tightened. Chinese demand remains strong, imports increased 10 percent in a year. Rumors say China will import 6 million tons in June.
Speculative traders are net long 81,900 contracts in soybeans. They are also long 13,500 soy oil and 49,400 soy meal. Index funds are long 149,000 contracts of open interest on the buy side of soybeans.
Political issues concerning high taxes taking soybean profits have Argentine farmers holding soybeans in storage. Inflation is high in Argentina so the price of soybeans in storage is rising. Transportation issues include longshoremen on strike over wage disputes that will not load soybeans or corn. Brazilian dock workers are in sympathy with those in Argentina. Once the issues are resolved the record South American crop will pressure prices.
Bullish news: Unexpected Chinese corn imports of 115,000 tons were bullish. Ethanol demand is increasing. The trend in gasoline prices rises in summer when travel increases. USDA is pressuring EPA to increase ethanol standards from 10 percent to 15 percent.
Prices are near the low end of the expected range. U.S. corn export sales bookings were the largest weekly total of this marketing year at 1.881 million tons. The trade guess was only 1.2 million tons. Japan was the big buyer at 672,400 tons. Index funds are 410,000 long contracts of open interest to the buy side of the corn market.
USDA says production will decrease 21 million bushels reducing carryover potential by 200 million bushels after increased exports. The new carryover figure is 1.7 billion bushels. Corn use is expected to increase 2 percent as ethanol use and world meat production increase.
Bearish news: Ethanol stocks are now at record high levels. U.S. planting progress supported by favorable weather is over 80 percent complete. Forty percent of corn has emerged setting a new record. Export inspections for the week were down 11 percent to 30 million bushels. South American production was revised higher again this week.
May corn deliveries of 716 contracts could reduce demand. Index Funds sold 4,000 corn contracts and are now net short 10,000 contracts. Commercial traders were 298,000 contracts of open interest on the sell side of corn markets. Commercial trader positions sometimes carry more weight since they are expected to have inside information on fundamentals of supply and demand.
Bearish news: Favorable weather for spring wheat planting has allowed 67 percent of the crop to be sown. The global wheat surplus is expected to increase. Ag Canada increased their projection of Canadian wheat acres to 23.3 million. Assuming average yields, that would put the Canadian crop bearishly above 24 million tons.
USDA weekly export sales were below trade estimates of 300,000 to 400,000 tons. The total was only 284,300 tons. Old crop export sales were expected to be light, with only a month to get it shipped. However, sales for next season of only 134,100 tons were disappointing. May wheat deliveries 383 contracts have reduced room in the export pipeline. Commercial traders are short 129,000 more contracts than buy contracts in wheat markets.
Bullish news: Wheat prices have moved higher in the Black Sea region and European Union. World Production is estimated to be significantly lower this season. Prices are near the low end of trading range and selling has slowed down. Traders hold a large number of net short positions. If demand increases these sell positions will be liquidated for profit sending wheat prices higher. Index funds are 181,000 buy contracts ahead of sell contracts. Funds traders bought another 4,000 Chicago wheat contracts reducing net short positions to 22,400 contracts.
Bullish news: Asian prices this week have moved higher. Thailand is selling rice this week between $470 and $480 per ton. Shipments from Thailand have increase over last year at this time. Pakistan is also rumored to have shipped more rice. Vietnamese prices are still below world average, but price quotes from Vietnam are now $350 per ton. Pakistani rice has increased in price to $375 per ton.
Weekly export sales exceed market expectations again this week at 68,900 tons. That is an excellent number for anytime during the year but especially at this late date. Over half of this week’s sales went to Mexico and Central America. African countries took another 25,700 tons to Nigeria, Algeria, Haiti, and Ghana.
USDA reported shipments for the week of 75,800 tons. About a third of the rice shipped was long grain rough to Mexico, Nicaragua, and Guatemala. Another third was medium and short grain rough sent to Turkey. Iraq is rumored to have purchased 30,000 tons of U.S. rice in its last tender.
Bearish news: There is talk of stain and damage problems in some Delta rice. Remaining high quality long grain rice maybe somewhat scarce in the United States but world supply remains heavy. World supply is anticipated to increase 6 million tons at next harvest. U.S. production is expected to increase by 22 million hundred weight.
The new crop condition is above the five-year average and planting progress is ahead of the five-year average as well. Fundamental weakness of increasing supply is reflected in slow demand for U.S. rice exports. The good start on a new crop has overwhelmed technical chart strength seen earlier.
External market action was negative when world stock markets dropped. Higher dollar values make U. S. rice expensive. Open interest went down 1,501 contracts to 15,370 from the previous week’s level of 16,871. Speculators on the buy side of the market began selling taking profits as the market weakened.