After the markets closed today, the USDA released their latest Crop Progress Report for planting. As this planting season has been hit with a lot of rain, the farmers have found it difficult to plant for this season in a timely manner. The below stats are still showing bullish figures for the grain markets. Although corn seems to be getting closer to where it should be at this time of year. Soybeans and wheat are still far from where they need to be. If overseas demand should increase and planting doesn't near the usual percentage, we could see much higher grain prices later in the year. Stay tuned.
Corn:
62% planted
48% last week
70% last yr
85% 5 yr average
Soybeans:
25% planted
14% last week
25% last yr
44% 5 yr average
Spring Wheat:
50% planted
35% last week
92% last year
90% 5 yr average
Oats:
88% planted
80% last week
92% last week
95% 5 yr average
From the USDA planting progress report of 4/27/09, the data showed that many of the markets are lagging behind the 5 year average of planting progress. Weather has also played a part in the market's recent rally. With the heavy rains in recent weeks, its been difficult for farmers to plant. If heavy rains continue after planting has occurred, than there is risk for flooding the fields. This could support higher prices of the grain markets even if the global economy remains negative to flat. The bullish bet on grains is for the planting progress to still be below the averages. The next USDA report will show if this is true or not.
On 4/28/09 we noted that if July corn should break above the $3.95 level we could be witnessing the next upward leg of pricing. On 4/29/09 we received a buy signal for the market. On 5/1/09 July corn hit a high of $4.1575. There is resistance in the $4.13 to $4.19 area. If this range is broken, we would be testing the $4.30 to $4.35 as the next major resistance level. On the downside the next support level is $4.04 to $3.98.
Soybeans (basis July) received a buy signal on 5/1/09. The next major resistance area is $11.25 to $11.35. On the downside there is support in the $11.02 to $10.97. If the market falls below this range the next major support level is $10.70 to $10.40 range.
On 5/1/09 wheat (basis July) received a new buy signal. The next major resistance level is $5.92 to $6.05. If the market continues to rally, a very strong resistance level is $6.29 to $6.54. On the downside there is support in the $5.50 to $5.30 range.
Below is the recent USDA's grain planting progress report.
Corn:
Current: 22%
Last week: 5%
2008: 9%
Avg of 2004 to 2008: 28%
Soybeans:
Current: 3%
Last week: N/A
2008: 2%
Avg of 2004 to 2008: 5%
Cotton:
Current: 16%
Last week: 11%
2008: 19%
Avg of 2004 to 2008: 20%
Spring Wheat:
Current: 15%
Last week: 65
2008: 32%
Avg of 2004 to 2008: 36%
Oats:
Current: 61%
Last week: 48%
2008: 52%
Avg of 2004 to 2008: 65%
Since our last writing of grains on 4/19/09, we saw the markets find support and begin to rally or at least come off the lows. As we have been viewing the May contracts, will will now be focusing on the July contracts. However the word of the week is Swine Flu. This seems to be on the mind of all markets as it may cause the global economy to take longer to recover and have an impact on travel related and commodity related industries.
Coming into the weekend the grain markets were focused primarily on the USDA's planting report released yesterday. However the immediate discussion of Swine Flu took priority as the weighing component on the grain and commodity markets. Yesterday China announced they were banning pork from Mexico and parts of the U.S. until further notice due to the flu. This would lead to a reduced demand for feed grain and it caused the grain markets to move sharply lower. And as the equity markets fell on the flu news, a slower global economy will only reduce the needs for many commodities.
Unitl recently there was no stopping soybeans. Since bottoming on 3/2/09 (basis the May contract) the market rallied over $2.34. 4/21/09 we received a sell signal on the May contract. On 4/24/09 we received a sell signal in the July contract. There is major support in the $9.82 to $9.61 range. If that should break, we would be seeking $9.40 to $9.20 as the next major support level. On the upside there is major resistance at $10.1. The market settled today at $9.83.
Wheat (basis July) had a sell signal 4/13/09. On 4/20/09 the market bottomed at $5.1250 and tested the lows of 4/3/09, where the market bottomed at $5.1075. On 4/27/09 the market topped at $5.5050. Due to the flu scare, the market sold off heavily yesterday. There is major support in the $5.12 to $5.04 level. If this should be broken, the next major support level is $4.94 to $4.50 level. However we believe the market is currently seeking a bottoming process. The next major resistance level is $5.30 to $.5.40. The market settled at $5.22.
Corn (basis July) received a sell signal on 4/13/09. The market then bottomed on 4/20/09 at $3.70. By 4/24/09, the market had rallied up to $3.95 which is a major resistance level. Due to the flu scare the market fell on 4/27/09 back to $3.70. There is resistance in the $3.86 to $3.95 area. If we break above this level we could be setting the stage for the next up leg. On the downside there is major support in the $3.70 to $3.54 area testing the lows of 3/2/09. The market settled today at $3.8350.
The grain markets have had an interesting run lately. With the release of the USDA report on March 31st, it appeared initially to have a bullish result on corn, wheat and soybeans. However only the soybean market really moved. And moved it did!!
The corn market (basis May) on March 31st triggered a buy signal just above $4, but over the following days the market only rallied to $4.075. On April 13th we received a sell signal. There is major support between $3.63 and $3.73. Ultimately the market could fall to $3.41 to $3.51, thus testing and possibly taking out the lows of late February.
Wheat (basis May) gave a buy signal on April 1st and offered a small rally when it topped at $5.72. On April 13th we received a sell signal and the market has since been caught in a trading range between $5.13 to $5.30. The market hit our initial resistance of $5.71. If the rally does continue, we would target the next leg up at $5.95 to $6.19 with a major resistance of $6.45. The market is currently holding in its major support of $5.10 to $5.15. If this area is broken the next support level is $5.05 to $4.94
On April 2nd we received a buy signal in soybeans (basis May) and the market never looked back as it rallied a $1. Since making a bottom on March 2nd the market has rallied about $2.35. As we noted on April 3rd, soybeans could rally to the $6.47 area. Now that it has rallied into this area we could see some consolidation. Initial support for the market is found around $10.43 to $10.23. If the market does continue to rally our next major resistance area is $10.73 with $11.39 as the next major resistance level. If the market breaks below $10.10 we could be seeking the next major support level about $9.60.
As we discussed earlier this week of receiving short signals over the past week in wheat, soybeans and on Monday in the corn market. Tuesday may have caused at least a short term bottom to form in the grain markets as the USDA released their planting and stock report. The report proved to be very bullish for soybeans and some what bullish for corn and wheat. But in recent weeks it seems to be a common story for many commodities including crude and copper to rally. As many commodities are quoted in dollars, the dollar index peaked on March 4th and had a recent leg down since March 30th.
The USDA report was released at 8:30 am on Tuesday. When the grain markets opened at 10:30 am all of the grain markets opened strong. Corn (basis the May contract) then quickly sold off to $3.8125 after which it immediately turned around and later that day we received a long signal. Support for May corn is in the range of $3.88 to $3.94. Corn has reached its initial resistance level of $4.04. If the market continues to rally, the next level of resistance would be $4.17. With another level at $4.35 to $4.65.
On March 27th soybeans (basis the May contract) gave a sell signal. After bottoming on March 30th, the market gave a buy signal on April 2nd. In a matter of a few days, the market rallied about $1. The market may be getting a little tired as its reaching prices that have not been seen since early February. The market may find resistance between $9.85 to $10.13 as it settled today at $9.955. If it should rally above this level we could be looking for a price objective of initially $10.60 and then onto $11.30 to $11.40.
In an earlier posting we reported receiving a sell signal in wheat (basis May) on March 24. The market then spent several days testing lows made on March 3rd. On April 2nd we received a buy signal. As wheat settled today at $5.6350, it may be nearing the first level of resistance of $5.71 to $5.86 and possibly $5.95. If the rally continues, the next level of resistance would be $6.19 and possibly pushing to the $6.45 to $6.73.
March witnessed a rally in the grain markets that coincided with a depreciation of the dollar and a very strong rally in equities. Since last week the grain markets were getting a bit overbought. On March 24th we received a sell signal in wheat, followed by a sell signal for soybeans on March 27th. Today March 30th we received a sell signal for corn. Keep in mind movement of the dollar, weather and plantings and perception of moving out of a recession will all factor into the grain markets over the next few months. The markets are also waiting for the USDA report due out on March 31st. The anticipation will be for increased acreage especially for soybeans.
Corn (basis the May 09 contract) has resistance at $3.90 and initial support in the $3.73 to $3.70 level. If the selling continues we could see corn in the $3.56 to $3.33 level, thus testing the recent lows earlier this year before it rallied.
Soybeans (basis the May 09 contract) has resistance in the $9.35 to $9.45 level and is currently sitting at its initial support of $9. If it breaks this area we could see soybeans in the $8.65 support level and possibly try to test the recent lows around $8.40
Wheat (basis the May 09 contract) in the $5 range is sitting at an initial support level and is testing the recent lows of $4.9850 from March 3rd. If it breaks this level the next support level would be $4.76 to $4.62. Ultimately we could see wheat in the low $4 to $3.70 range.
After selling off earlier this year the last few weeks have seen a little rally from the lows. Late February oats signaled a start of a rally, followed by corn, wheat and soybeans in early March. This rally has several possible components. 1) As we enter the spring planting season, grains have a tendency to bottom. 2) In recent weeks the market participants are cautiously increasing confidence that the American economy may be starting to stabilize, or at least less fear of a falling economy. Thus greater demand for commodities. 3) Talk that China's economy may be starting to bottom is also supporting not just grains, but several commodities. Export demand is always a strong factor in pricing grains. 4) The last several weeks have seen a falling dollar and this equates to increasing overseas demand for commodities. 5) Another level of support has also been seen in the recent rally of the Australian $ and the Canadian $.
The grain markets may be getting a little tired. They are nearing selling signals and will either find support in the next couple of days or begin the next leg down. Basis the May contracts, corn has major support in the $3.85 to $3.79 range. Soybeans has major support in the $9.37 to $9.30 level. Wheat did signal a short move yesterday and is breaking major support levels and would need to break above the $5.63 resistance level to find the next bull market.
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