CBOT soybean, corn futures looking ‘top-heavy’

CNS Canada — Soybean futures on the Chicago Board of Trade moved higher for the fourth straight week during the Feb. 26 to March 5 period. Steady demand, ongoing concerns about tight U.S. supplies and weather problems in South America helped to support the market.

Prices looked like they had hit a top, and the market was headed lower on Feb. 27 — but that all changed when traders became concerned about the political problems in the Black Sea region, said Sterling Smith, analyst with Citigroup in Chicago.

“Unfortunately our little friends in Russia kind of changed the game briefly with their antics in Ukraine and that put a big bid under the corn market, which allowed beans to move higher,” said Smith.

The market is starting to look top-heavy now, he said, adding that he wouldn’t be surprised to see profit taking ahead of the Monday (March 10) U.S. Department of Agriculture report.

Expectations that the USDA report will show increased usage of U.S. soybeans, due to stronger exports and domestic crushing, may add a slightly bullish tone to the market, Smith said. But prices don’t have room to move much higher.

“I think we’re going to start to see some better movement out of Brazil, so I think the upside is limited for the soybeans,” he said. “And if we can begin to see a shift in momentum prompted by some fund liquidation, we can pull back here.”

Corn futures also moved higher in Chicago, lifted by ideas that problems in Ukraine would slow exports out of the region, resulting in stronger export demand for U.S. corn supplies.

The corn market is starting to look a little bit top-heavy as well, Smith said, adding the market may need to move back down to the US$4.60 per bushel level in the May contract from the US$4.82/bu. settlement on Wednesday.

But U.S. corn futures will probably start to rally again once traders shift their focus to the planting of the upcoming U.S. corn crop.

“We’re going to start to talk about planting in the U.S. any minute now, and as we start to move into that conversation, typically the market starts to build some risk premium,” Smith added.

If the weather continues to be cold and damp, planting of corn would be delayed, which would support corn futures and weigh on soybeans, Smith said.

Longer-term, USDA’s projection that 2014-15 U.S. corn cash prices would be around US$3.90 per bushel won’t likely be realized.

“In order to get to some of those USDA numbers, we need to live in a perfect world where there aren’t any weather issues at all,” he said. “I think the market would find very good support close to US$4 a bushel.

“I just can’t picture us having a perfect case scenario, so I think those USDA numbers are probably a little low.”

— Terryn Shiells writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.

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