- The week started on a slightly more positive note with CBOT grains all looking a touch firmer and that remains the situation as we enter the final hour of trading in Chicago. The technical picture in wheat looks extremely oversold with both RSI and Stochastic studies at or close to extreme levels. However, this does not constitute a buy signal on its own! We would reiterate the fund net short position in CBOT wheat, which was increased in the latest released data, is held in the cheapest wheat in the world right now. Call us cynical if you will, but one has to be extremely confident to hold such a position!
- The soybean technical picture looks to have found some degree of support with Friday’s (March ’13) low coinciding with the low of 16 November and also an old chart “gap” going back to 28 June last year, which is now filled. This could prove to be a pivotal time in soybean pricing if this level holds and provides support going forward.
- The market has seen an improved interest from China, which has now returned from their extended New Year break, with soybean crush margins at relatively good levels and a keen interest to lock these in with purchases of now cheap US beans, The ebb and flow of Chinese margins is a good indicator of buying interest and we could see this adding to support right now.
- The trade continues to look forward to Friday’s production and stocks report. Average trade estimates are for a 75 million bu decline in 2012 US corn output and an increase of 22 million bu in soybean output. Dec 1 stocks are expected to show corn at 8.219 million bu and soybeans at 1.981 million bu; both these figures are well below stocks of 12 months ago.
- Given our outlook for US soybean and corn stocks at the end of the season, and the need to see strong demand rationing through price, we continue to look for upside in current pricing whilst continuing to acknowledge the current solid downtrend. We maintain a close watch out for any sign of price reversal signals such as the potential soybean support mentioned earlier.
- Latest EU weather conditions are starting to reflect a degree of concern over crops struggling to flourish in waterlogged ground. Ongoing heavy rain accompanied by warmer weather melting snow cover has the potential to leave poorly developed crops vulnerable to colder conditions in coming weeks.