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.
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Below is the recent USDA's grain planting progress report. 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. 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!! 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. 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. 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 $. |
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