Corn – Corn is little changed this morning ahead of the USDA report, which is expected to show lower yields and production for the 2007/2008 crop year. Average analyst estimates for production are 13.109 billion bushels, down from the 13.168 billion bushel figure released in November. The market is looking for an average yield of 152.3 bushels per acre, down from 153.0 bpa in November, and ending stocks are expected to shrink to 1.698 billion bushels, down from 1.797. Yesterday's export sales were rather lackluster, coming in at 670,000 metric tons, well below the lower end of estimates of 750,000 to 1.05 million MT. Corn has made a good run since the last figures were released, making the market ripe for profit-taking in the event of an upside surprise. The lower export sales figures were extremely disappointing given the amount of Corn U.S. farmers were selling overseas during the latter half of 2007. March Corn is technically overbought, which could accelerate sell-offs in the event of disappointing production numbers. The March Corn chart shows two consecutive spinning top patterns, indicating indecision. The pattern would normally portend a high likelihood of consolidation or a pullback, but may indicate that traders were squaring up positions ahead of the report. Support comes in at 470, 466.50 and 460.75, while resistance can be found at 480.75, 486.25, and 490.75.
Soybeans – Beans are trading about 5 cents higher this morning on very light volume. Average analyst estimates for production are 2.584 billion bushels, down from the 2.594 billion bushel figure released in November. The market is looking for an average yield of 41.2 bushels per acre, down from 41.3 bpa in November, and ending stocks are expected to shrink to 170 bushels, down from 185. Yesterday's export sales were poor for actual Beans – coming in at 118,400 MT – but Bean Meal was within the average range of estimate at 77,900 MT and Bean Oil almost tripled estimates to come in at 28,200 MT. China's appetite for Soy Oil has been a driving factor for the Bean market and the nation has demonstrated in the past that appreciation in commodity prices has done little to curb demand, so Bean Oil should be no exception. RSI has fallen back from overbought levels, indicating the market has room to maneuver higher in the event of a bullish report. The March Bean chart shows a bullish consolidation pattern forming, suggesting the market may see more upside in the near future. Support comes in at 1251.25, 1242.50 and 1233, while resistance can be found at 1269.75, 1279.25 and 1288.25.
Wheat – Unlike Corn and Beans, the Wheat market has struggled to keep its footing in recent weeks due to higher acreage estimates and improved growing conditions for overseas producers. The 2008 winter Wheat planting estimate is expected to show 48.657 million acres, up from 44.987 last year due to attractive prices. The hard red crop traded on the KCBOT is seen at 34.88 million acres, up from 32.94 million a year ago. While the figures are expected to be bearish for Wheat, the market has the most room to run in the event of a bullish surprise in the report. The NOAA stated that it sees the La Nina weather pattern continuing through March, which may impact on U.S. yields. This bullish assessment is tempered by the fact that Australia will likely see higher precipitation over the same time frame. July Wheat has been forming a wedge pattern on the chart, indicating the possibility of huge price swings on a breakout either way. Momentum is showing strong bearish divergence from the RSI, leading to a negative near-term bias. A violation of December 17th lows of 763 could trigger stops and lead to extended sell-offs. Support comes in at 769, 762.25 and 750, while resistance can be found at 788, 800.50 and 807.50.
Rob Kurzatkowski, Commodity Analyst