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The following market analysis is for the week ending April 23.
CORN - Corn crashed lower to begin the week of April 19 as nearly ideal planting weather greeted growers, and ended the week in similar fashion. Monday's action virtually set the trading range for the week as July corn traded within the range outlined last week from $3.55 to $3.77 3/4. The actual range this week in the July contract was $3.57 to $3.73.
As the week progressed, corn retraced the early week loss as funds moved to cover short positions, soybeans lent strength and export business was brisk. However, as the weekend approached, profit taking was attractive with rain heading into the Midwest for the freshly planted acres and China laid out plans to sell more corn from their reserves next week.
Reports from growers on corn planting indicate some have already finished and moved on to soybean planting, and will welcome a shower; while other areas are just getting rolling. Planting progress as of April 26 will likely be underestimated by the U.S. Department of Agriculture at 40 to 50 percent, when many private firms believe it's closer to 80 percent complete. Last week it was reported at 19 percent, just shy of the record 20 percent complete as of that date.
Whatever the reported number turns out to be, it will almost certainly surpass the 37 percent record pace for this week. Thoughts of huge yields are already dancing in more than a few growers' heads. Soybean planting is expected to be reported at 5 percent complete with private estimates running up to 10 percent complete.
U.S. export sales this week at 58.3 million bushels were better than anticipated, all for old crop. Total export commitments for the year are 1.51 billion bushels versus the USDA yearly projection of 1.9 billion bushels. China sold 1.1 million metric tons of corn from their reserves this week to combat high domestic prices and has another auction scheduled this coming week.
Could corn imports from the United States be a possibility? Maybe, but China for now is meeting demand with reserve releases (they are estimated to have 35.6 mmt of corn reserve) and importation of DDGs. Cold weather in China's growing regions is being monitored as being a potential risk to the crop currently being planted.
Former USDA Secretary Mike Johanns said in a speech this week the he believes the Environmental Protection Agency will not increase ethanol blend rates beyond the current 10 percent. Reports from the same conference indicated others in the know do believe the blend rate will be approved.
Informa Economics held their annual agricultural conference this week. At the conference, they indicated that the U.S. corn crop was likely to be 13.1 billion bushels using a yield of 161.9 bushels per acre and resulting with a carryout of 2.1 billion bushels for the 2010-11 marketing year.
A new hedging tool for ethanol producers and livestock producers will begin trading April 26 with the introduction of the Dried Distillers Grains or DDG futures contract. The contract size will be 100 short tons per contract and list all 12 months. It will trade only on the electronic platform during the same times that grains trade.
OUTLOOK: The week held something for everyone with a drop close to support, a push toward resistance, and then a subsequent retracement of the gains - all in 5 trading sessions. July corn closed the week down 13 cents at $3.61. First support moves to $3.55, then $3.33 3⁄4. December corn fell 16 cents for the week to settle at $3.78 1⁄4 after trading a weekly range of $3.76 1⁄2 to $3.92 3⁄4. Resistance in the December is at last week's $3.94 3⁄4 double top and support at $3.75/$3.55. Weather, money flow and the pace of grower selling will be the keys for direction; but with the current scenario in place, rallies may be viewed as selling opportunities.
SOYBEANS - After getting off to a rocky start, soybeans rallied to levels not seen since mid-January on good demand, fund buying and ideas the rapid corn planting pace may reduce new crop bean acres.
Weekly soybean exports were disappointing at 11.3 million bushels, bringing total export commitments to 1.36 billion bushels for the marketing year. China accounted for 42 percent of this week's sales. China also bought nearly 400 tmt of new crop U.S. beans this week that should show up on next week's report. Additionally, they canceled 165 tmt of old crop beans this week that will also be included on the next report. This may be the start of slowing old crop sales that has been expected.
Crush demand in March was robust at 156.1 million bushels versus last year's March crush of 144.4 million bushels. The surprise on the Census crush report was the big drop in meal stocks from 702 thousand tons in February to 362 thousand tons at the end of March.
The Argentine Ag Ministry this week lowered their soybean production estimate from 55 mmt to 52.5 mmt. The USDA's number is 54.0 mmt. The Buenos Aires Grains Exchange held their 54.4 mmt forecast at unchanged.
Informa Economics 2010-11 soybean estimates released at their conference this week included production at 3.342 billion bushels using a yield of 43.3 bushels per acre and resulting ending stocks for next year of 590 million bushels. The USDA is carrying this year's ending stocks at 190 million bushels.
OUTLOOK: July soybeans closed out the week 15 cents higher at $10.10 and the November contract rallied 13 1⁄2 cents to $9.79 per bushel. At the forefront of things to watch are the pace of U.S. exports, planting weather and progress, and money flow in/out of commodities. Beans broke out to the upside this week on the charts with first resistance in the July contract at $10.20/$10.35 with support at $9.82/$9.60. While beans are exhibiting an uptrend, average weather projects lower longer term prices.
Nystrom's notes: Closing changes this week: July Minneapolis wheat up 7 1⁄2 cents, Kansas City wheat down a penny, and Chicago wheat up 3 cents. Crude oil was up 45 cents at $85.12, heating oil was 3.36 cents higher, gasoline up 7.61 cents, and natural gas gained 21.8 cents. The Dow was up 186 points, gold increased $16.80, and the U.S. dollar index jumped 0.53 points.
<center>•••</center><i>Phyllis Nystrom is a market analyst with Country Hedging in St. Paul.</i>
