Monday, April 1, 2013
Highlights from the USDA Quarterly Gain Stocks and Prospective Plantings Report:
Corn: As of Mar 1st: 5.40 billion bushels Estimate: 5.01 billion bushels
Wheat: As of Mar 1st: 1.23 billion bushels Estimate: 1.167 billion bushels
Soybeans: As of Mar 1st: 999 million bushels Estimate: 940 million bushels
Planted Acreage Forecast
Corn: Acres: 97.3 million Estimate: 97.3 million acres
Wheat: Acres: 56.4 million Estimate: 56.4 million acres
Soybeans: Acres: 77.1 million Estimate: 78.5 million acres
As expected grain futures saw volatile trading on Thursday as the USDA released its highly anticipated Quarterly Grain Stocks and Prospective Plantings report. The biggest surprises came in the stocks report with the USDA seeing much larger inventories than traders expected. For Corn, the USDA projected U.S. inventories as of March 1st at 5.40 billion bushels, down from 6 billion bushels this time last year but nearly 400 million bushels higher than the average trade estimate. The report was not friendly for Soybean bulls either as the USDA's March 1st projection came in at 999 million bushels, down from 1.374 billion bushels last year but up a whopping 60 million bushels from pre-report estimates. All Wheat stocks as of March 1st were projected at 1.23 billion bushels, which was higher than last year's totals and above analysts' estimates. Planting Intentions came in very close to expectations with the USDA expecting 97.3 million acres for Corn and 56.4 million acres for Wheat. Soybean acreage was deemed a slightly bullish 77.1 million acres vs. 78.5 million acres traders were anticipating. The market reaction was swift with Corn futures falling the 40-cent limit in old- crop May and July 2013 contracts and sharp declines seen in both Wheat and Soybeans as well. Old-crop vs. new--crop spreads were particularly hard hit as larger than expected old crop inventories triggered strong liquidation selling in the bull spreads particularity in Corn, where large speculators were holding significant long positions in the old-crop/new-crop spread. Given the new data from the USDA, we may see these spreads continue to weaken as these spreads are unwound.
Looking at the daily chart for May Corn, we notice Thursday's limit-down move, seemed to have negated the upside breakout from the consolidation phase that began after contract highs were made back in August of last year. Prices are now below both the 20 and 200-day moving averages and momentum as measured by the 14-day RSI has turned weak with a current reading of 39.88. The next support point is not seen until the January 7th lows of 678.50. Below this support level, we do not see any real chart support until the 585.00 price level. Resistance is seen at the recent highs of 737.75.
Mike Zarembski, Senior Commodity Analyst