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Da Bulls and Da Bears: February 16, 2016

 

 

Bull Factors

  • Calendar – time to get serious?
  • Short covering
  • Brazilian port delays

Between Chinese New Year, President’s Day and Carnival, many of the world’s agricultural centers have curtailed normal operations of some sort or another during the past week or so.  Now that these are behind us, it appears that people are ready to get serious and acknowledge that there is a lot of work to do in a short period of time.  Between now and planting time in the U.S., there are a lot of decisions to be made in many parts of the ag industry.

Speculative funds increased their short in corn futures last week, and many are talking about what happens when they start to unwind this position and what that will do to the markets.  Most are in the camp that says they begin to do this prior to planting in the U.S.  If that is the case, it would be a good idea to have some firm offers in for any Old Crop sales you want/need to make in the same time frame.  For March corn, there is resistance around 3.65, 3.75 and 3.80.  For May corn, as you might guess, it’s about a nickel higher.  For March beans, resistance is noted around 8.80, 8.90 and then a very strong resistance point at 9.10.   For May beans, the first two are similar, but then, 9.15.

We’re starting to hear a little more every day about port delays in Brazil.  This is a fairly typical situation this time of year, but it always gets some press coverage, and considered somewhat bullish.  To me, it’s just an annual ploy by organized labor and never seems to have much of a lasting impact on the overall price.  But, it does makes a good story. 

 

 

Bear factors

  • Large amount of unsold grain
  • Ethanol margins/supply
  • Crude oil weakness

We continue to hear many reports of the above average amount of unsold grain for this time of year.  This will continue to weigh on the market, as most observers assume that this grain will need to be sold at some point.  Right now, it’s a bit of a guessing game as to who blinks first.  This could very easily weaken the cash prices if a lot starts to move at the same point in time. 

The ethanol industry continues to struggle and several companies are reporting negative margins.  There is also a tremendous amount of ethanol stocks on hand, further depressing the market.  There are also stories of some plants slowing down and/or taking extended down time for maintenance.  There is probably not a lot of maintenance down time in this part of the country, due to the weather, but it could begin to impact all of us in the near future when temperatures stay above freezing. 

Crude oil stays on the bear factor list.  Trading anywhere around $30/barrel will continue to keep a lid on grain prices, especially corn.  There is talk today that some of the OPEC countries will try to reign in the over production from the past several months.  But, it will take more co-operation between many other members for this to have any impact.  And, with the burdensome amount of oil already in storage, even if they get this to work, it will be slow to affect oil prices and/or positively impact grain prices.    

-Tom Guinan, Grain Origination Manager 

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