U. S. prospective plantings Crop
Soybeans All Wheat
Other Spring Wheat
2009 (USDA April forecast)
(millions of acres) 84.548 Range Seedings
85.982 79.251 58.856
Written April 4, 2009
This past week, USDA released the first farm-surveyed results of the season for 2009 U. S. acreage intentions (March 31) as well as U. S. grains stocks as of March 1. The report has bullish news for the soybean market as pre-report expectations by the trade for a big run-up in 2009 U. S. bean acres was dead wrong. USDA reported 2009 bean acres only steady with last year. That was the big news of this report. Data for corn and wheat was more market neutral, but given a positive spin.
The table summarizes today’s USDA prospective plantings released this morning. Soybeans stole the show Intended 2009 U. S. bean acres, while a record at 76 million, came in three million below trade expectations and gave the market a very strong buy signal. A more minor influence, though still bullish, an old-crop USDA March 1 bean stocks estimate at 1.302 billion bushels is 0.020 billion below the average trade guess. This reflects a stronger-than-expected old crop usage pace. The market was reminded via a two-by-four to the head of the old crop market’s tight supply situation.
Weakness in the U. S. dollar, strength in the crude oil market and slight gains in stock markets all provided spillover buying interest. Nearby May CBOT soybean futures catapulted to close the week at US$9.95 per bushel, just short of overhead resistance at $10.
Winnipeg canola futures have also treaded higher, but continue to lag behind soybeans. In doing so, canola is looking increasingly attractive to foreign buyers.
Chartwise, canola futures are trying to demonstrate their moxy. But they still need to convince traders that canola has the potential, near term, to rise through the cloud of overhead resistance which currently resides in the $420 to $430 per tonne area, basis the May contract. Friday’s close (April 3) at $431.80 looks promising, but requires confirmation.
The markets have been filled this winter with talk of demand destruction, but looking at the pace of oilseed exports and domestic oilseed crushing on either side of the Canada/U. S. border, I just don’t see it. Higher-than-expected weekly U. S. export sales for soybeans add to the bullish tone. Canola sales are the same, with talk today that Mexico and Pakistan have been in the market over the past two sessions.
The point to be conceded though is that unpriced canola in the hands of the Prairie farmer remains record large for this time of year. But if the soybean market wants to run, canola will benefit from some spillover effect — muted as it may be.
These markets are not all about fundamentals. If speculative money is determined to re-enter the long side of commodity markets, based on grander macro-economic enthusiasm, then fundamentals be damned!
New money has been increasing its involvement in agricultural commodities into the start of April. Technically, canola and soybeans are looking pretty good. Fundamentally, given the large Canadian inventory that yet needs to move out, bullish sentiment is hard to sustain.
That said, when the spec money wants to charge back in, there is little than can be done to stop it. But given canola fundamentals, I am still of the opinion that rallies must be sold. I for one am gearing up for such an opportunity, both for cleaning up old crop sales and pushing forward on new crop. I’m sitting tight for the moment, but action may be taken should we work this cash market back towards $10 per bushel.
Such remarkable strength this week in U. S. wheat markets was surprising. Strength in equities, crude oil and CBOT soybeans helped support wheat, as did the weaker U. S. dollar. But it was mostly a lot of spec buying across the majority of the commodity markets that helped drive the wheat market higher.
Minneapolis spring wheat futures led the way upward as USDA pegged U. S. spring wheat acres at 13.0304 million acres, which was below the average trade guess of 13.639 million. Given ongoing flooding, traders view today’s estimate as the high-water acreage mark for the season. All wheat acres at 58.638 million were about 200,000 acres below the average trade guess.
MGE futures have gone a long way to recovering much of the dismal price action of the week before. PFCanada continues to watch with increasing interest as the market now makes its move into our target area (US$6.75 to $7 per bushel) to consider possible pricing on old crop CWB basis contracts and new crop fixed price contracts.
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