Market Movement - Thursday, 24 March 2016

The extreme weather around the U.S. has done little to boost markets as:

  • The global supply remains sufficient.
  • China appears to be fairly well supplied.
  • Europe and the Black Sea region have an abundance of feed wheat.
  • Crop conditions in Brazil and Argentina continue to improve.

Technically speaking we are stuck in a sideways rut according to Kevin VanTrump of the VanTrump Report.  The range for the past two weeks has seen a total movement from high to low of less than 7 cents and for all of 2016 there has been less than a 25 cent range.  2015 saw a similarly small trading range until the first week in April.  During April of 2015 we saw corn lose about 50 cents to sub $3.50 prices, then it managed to recover +80 - 90 cents per bushel from mid-June through mid-July then fell back into a $3.50 - $4.00 per bushel range.  There’s no way to know if this market year will react in the same fashion but VanTrump finds that “it’s certainly strange to see us trading in this tight of a range considering the extreme volatility we’ve become accustomed to during the past decade.  I did a little checking on the charts and the last time the first three months were in a tighter range was all the way back to 2003, when we traded January-March in a range between $2.27^6 and $2.45^2 per bushel. It’s just strange to think we could be back to that type of trading environment and still be using corn-for-fuel.”  Below is a 25 year chart that shows the volatility that the market began to experience once ethanol production and the RFS came to be in 2007.  VanTrump questions if the market “is trying to tell us something more important???”

 

Generally speaking, old-crop corn prices tend to peak prior to planting season in years with large amounts of carryover.  VanTrump cautions that “the JUL16 contract might now be nearing the upper end of its range, possibly somewhere between our current price and $3.90 per bushel.  There is also more talk that most commercials have satisfied their appetite for old-crop supply.  Meaning the basis in many parts of the country may continue to fall under pressure in the days ahead, especially if flat-price continues to move higher.” 

The map below indicates the 2016 early planting dates for corn in various regions of the country.  Currently corn planting is underway in Arkansas, Kansas, Kentucky, Oklahoma, southern Missouri, Texas and Tennessee.  

 

There have been indications that the Chinese soy market is increasing while at the same time the Brazilian Real is trading back at 6 month highs.  This is positive news for U.S. exports, with the increase in value of the Real, export prices out of Brazil are now above that of U.S. exports which may turn Chinese attention back to the U.S. for extended coverage.  Keep in mind though that the expected global carryout of bushels may dampen the benefits of this recent rise in the value of the Brazilian currency.

 

Temperature expectations through the Easter Holiday weekend.

 

According to a recent updated forecast from the Weather Company’s Professional Division, the summer of 2016 will be a warm one over much of the U.S.  The northern tier of states from the Pacific Northwest through the northern Plains and Great Lakes and into the Northeast can look for temperatures much above average while the southern tier of states can expect above normal temps.  In past years when we have seen an El Niño transition to a La Niña during the summer/early fall, July has typically been the hottest month and the summer heat has been centered in the northern Plains and into the Great Lakes regions.

 

 

 

 

The staff at Ag Performance wish you and your families a very Happy Easter!!

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