Market Wrap: February Week One
Feb 4, 2010 10:12 AM, By Ray Nabors, Heartland Ag Network
Non-commercial traders reduced buy positions 56 percent in January. Grain and oilseed supplies are at the highest level since 2001 and 22 percent above 2007 supply. The availability of global wheat supplies is limiting corn and soy-meal export potential.
Soybeans
Bearish news: The prospect of a record corn and soybean yields in Argentina and Brazil is putting major harvest pressure on grain and oilseed prices. Current prices reflect demand shifting toward South American supplies. China is not expected to absorb South American soybean production.
Chinese prices moved 2 percent lower in one overnight session. Higher dollar values have a limiting effect on export sales of commodities from the United States. Soybean prices are expected to trade in a consolidation pattern short term but the trend remains down.
Soy-meal supply currently exceeds demand and is expected to remain oversupplied this season. South America will have large supplies of meal after harvest.
The trend is bearish; consider selling whenever soybean prices rally. Soybean prices have dropped $1.66 since the January high. Export inspections of 40 million bushels were below expectations.
Bullish news: Export demand for soybeans remains high near term.
Vegetable oil supplies are getting tight. Palm oil supplies are limited and production is down. Rapeseed oil supplies in Canada are good but soy oil and canola oil will be tighter because of limited palm oil supply. Indian rapeseed production is expected to be down 700,000 tons.
Soy-oil sales are 20 percent above average. Soy-oil supplies in the United States are below 3 billion pounds and below market expectations. Soybean crush last week was 173 million bushels. Soybean exports of 857,000 tons were at the high end of market anticipations.
Corn
Bearish news: Feed use is down significantly. Cattle and hog herds are down significantly from a year ago. Ranchers have been reducing their breeding stock. Smaller herd size equals less feed use. Corn and Soy meal are both negatively affected.
Corn export sales are near 52 percent of USDA export forecasts. The average for this week is 56 percent of that forecast. Corn exports are 4 percent behind average.
Traders anticipate the potential for farmer selling in corn and beans to become reality in the spring. This is anticipated to exacerbate the harvest pressure out of South America. Traders hold a large number of long positions keeping the potential number of sellers large.
Bullish news: Corn exports were over 900,000 tons and near the high end of market expectations. Lower prices usually stimulate exports. Export inspections near 37 million bushels were above market anticipations.
EPA renewable fuel mandates are near finalization. It is anticipated more ethanol and biodiesel will be in demand because mandates will increase. Ethanol production was up 6 percent last month using 362 million bushels. Higher energy prices support beans and corn.
Farmer selling of corn remains light. As transportation pipelines that have been clogged with soybeans become available. Corn export demand could increase quickly. Lower prices stimulate demand.
Wheat
Bearish news: Wheat prices are expected to test new low levels in the near future. Traders expect prices to break through support levels established last fall.
Demand for United States wheat is not expected to hold up. Large supplies in Asia and Europe are more competitively priced. Eastern Europe estimates winter wheat production will increase 35 percent.
