Carl German, Extension Crops Marketing Specialist; clgerman@udel.edu
Profit Taking and Position Squaring Ahead of Planting Intentions Report
Profit taking and position squaring ahead of USDA’s March 31 Planting Intentions Report has taken some of the steam out of the late arriving seasonal rally for U.S. corn and soybeans. The resumption of the rally and the extent will depend to some degree upon planting intentions and weather conditions for planting progress. Of course Wall Street and the government’s battle to stave off economic disaster will also weigh in on these markets in the weeks ahead.
Corn Analysis
Non-Commercial/speculative traders are currently net long in corn after being heavily short just three weeks ago, according to the Commitments of Traders Report issued March 17. Burdensome old crop supply is likely to stymie the seasonal rally until acreage intentions and crop progress become known for the ’09 crop. Wet weather in the Midwest is threatening to slow row crop planting this spring.
The export sales report for the week ending March 19 showed U.S. corn sales at 46.9 million bushels, well above pre-report estimates and what was needed to meet USDA’s projection of 1.7 billion bushels for the ’08/’09 marketing year. Shipments were reported at 30.6 million bushels, below that needed to stay on pace with projections.
Soybean Analysis
The Commitments of Traders report showed mixed activity by fund traders. Old crop soybeans are viewed as being in short supply, with traders looking for a marked increase in U.S. soybean plantings for the ’09 cropping season.
The U.S. Census Bureau reported soybeans crushed at 135.6 million bushels for the month of February, slightly above the pre-report estimate but significantly below last year’s February crush rate of 144.4 million bushels. Bean oil stocks of 3.027 billion pounds were slightly higher than last month’s 2.933 billion pounds. Meal stocks of 434.7 thousand short tons, were above the February ’08 number of 331 thousand short tons.
The export sales report showed sales at 15.8 million bushels, above the 6.4 million bushels needed to meet USDA’s projection of 1.185 billion bushels. Shipments were also above that needed to keep pace with projections.
Wheat Analysis
The net short position of large scale trend-following funds was reported to have scaled back some as of the week ending March 17. Rain is forecast in the dry Southwest and Southern Plains. Large portions of the SRW wheat growing area are currently reported to be wet.
The weekly export sales report showed sales of 9.7 million bushels, above what’s needed to keep pace with USDA’s’08/’09 marketing year projection of 980 million bushels. Shipments were also reported to be above that needed to stay on pace.
Market Strategy
In a normal year, the March 31 Planting Intentions Report would not generally be viewed as mattering all that much. The actual acreage report isn’t published until the end of June. The difference this year seems to be two-fold. First, a significant acreage increase is anticipated for U.S. soybean production for the ’09 crop year as compared to last year. That can have a significant impact on the dynamics of the market and ending stock projections, placing a premium on old crop soybeans while limiting upside potential for the new crop. In fact we are already observing the anticipation of a large acreage increase with an inverted soybean market. Second, the commodity markets, as most other markets, are looking for anything to provide them with direction. Remember, markets do not like uncertainty. Although a long shot, the planting intentions report is being held out as being something that can clear up some of the uncertainty being held out for the corn and soybean markets. To some degree that may be true, however, anticipation of larger soybean acres and smaller to equal corn acres has already been factored into the markets. New crop Dec corn futures are currently trading at $4.21; Nov soybean futures at $8.81; and July SRW wheat futures at $5.25 per bushel. For technical assistance on making grain marketing decisions contact Carl L. German, Extension Crops Marketing Specialist.