Written Commentary
The Ghost in the Machine Q1 2024
March 19, 2024
SOYBEANS
The soybean complex closed higher across the board with support stemming from optimism a US debt ceiling agreement will be reached before the Federal Government runs out of money late next week. Soybeans were $.12 – $.16 higher, meal was up $3 – $6, while oil was 30 – 40 higher. No fresh demand news as US soybeans remain $20 – $40/mt over SA supplies thru the end of summer. July-23 soybeans spent much of the past week and a half in a $13.05 – $13.45 trading range. Weak demand has limited the upside, while weather uncertainties have support prices as they approached $13. Weather forecasts next week will likely trigger a breakout of this range. Money managers position in soybeans is likely close to being flat. Probably still long close to 65k meal and short 30k oil.
CORN
Prices rallied $.13 – $.18 led by strength in new crop futures as drought fears have stimulated short covering heading into the 3 day Memorial Day Holiday weekend. Longer range weather models continue to show limited moisture across a large portion of the US Midwest with temperatures building to much above normal readings thru the first week of June. While this will not be detrimental to yield potential just yet, the fear is it will develop into a widespread drought similar to 2012. As a result additional weather premium is needed. The mid to longer range forecasts for the Midwest will drive price action on Monday nights reopening. July-23 surged into new monthly highs, while briefly penetrating resistance at its 50 day MA at $6.06 before settling back a bit into the close. Dec-23 corn stopped just shy of its monthly high of $5.37. Next resistance is the 50 day MA at $5.41 ½. This afternoon’s CFTC report will likely show the money manager short position in corn at roughly 90k contracts. The first crop condition report on Tues is likely to show initial ratings historically high. As usual this time of year weather will be the determining factor for the next $.50 in price movement. Expect volatile trade next week with weather markets front and center.
WHEAT
Prices were higher across the board as KC has traded both sides throughout the day. Chicago and MGEX were both $.10 – $.12 higher, while KC closed $.01 – $.03 better. This morning’s jump in July-23 KC was capped by its 50 and 100 MA resistance near $8.33 ½. Today’s high in July Chicago was capped at yesterday’s high of $6.16 ½. Recent moisture continue to chip away at drought areas in the Southern plains. Likely too late to have much impact on this year’s harvest, however I’d expect another 1 – 2% increase in G/E in next Tues crop condition report. India’s farm ministry forecasts 2023 wheat production at a record 112.7 mmt, up from 107.7 mmt YA and the previous record of 109.6 mmt in 2021. They expect monsoonal rains between June-Sept to reach 96% of their historical average despite the likely emergence of El Nino. Despite the record production it’s unlikely they’ll be an aggressive exporter of the grain, as they seek to build domestic inventories while bringing down domestic prices.
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