Corn Fundamentals: bullish to corn is the key focus of present spring planting delays. One rain system is forecasted for this week, Thursday through Saturday, west to east 80% coverage with amounts in a range of .25 to .75 inch. If there is any positive news to this wet outlook, at least temperatures are expected to warm, deviating from the most recent colder than average temperatures.
For New Crop Marketing, the total amount Allendale has hedged as a percent of anticipated 2008 production is 25%. Looking at specific prices, 6040 versus the December 2008 contract is key support, with 5790 as a trader momentum shift point. The immediate technical trend is bullish. Immediate resistance is 6300. We will monitor and alert when to resume hedges.
Long term Allendale remains bullish to old and new crop corn as a result of declining US stocks, old and new. New crop acres to be planted may result in 480-520 million bushels of 2008/09 ending stocks under average conditions. With present planting delays, 219 million bushels may not be far away, what do you think? Allendale presently is long the 590 July corn call.
Soybean Fundamentals: negotiations continue in Argentina to put an official end to the strike over increased export taxes on soybeans. The latest discussions suggest headway is made with concessions made by farm groups and government. Along with the farmer sector the government is attempting to provide incentives for both large and small-scale sectors, with potentially the mid-sized farms on the mute end. Much of Monday's weakness may be attributed to technical based selling. Soybean futures have fallen through Allendale's #1 Moving Average. With Monday's corn planting progress very much behind the five-year average, look for new crop soybean futures to stay under pressure on ideas of additional 2008 planted acres to be envisioned.
We will hold new crop soybean hedge at 40% of anticipated 2008 production and alert you when to resume hedging. A move in November soybeans to 13300 may warrant additional hedging. Technical trend line chart support is 12100. The intermediate trend however remains bullish.
The trade remains focused on Argentina strike developments, perception of strong vegoil demand from India and China, and corn plantings delays, potentially injecting more 2008 soybean acres. Stocks of USA soybeans remain tight and as long as Argentine farmers and its government remain in negotiations, foreign demand is shifting to Brazil and the USA.
Wheat Fundamentals: Overnight Sunday, Jordan and Morocco have launched fresh tenders for wheat. After Monday's futures close, Egypt announced a new tender for June 1-30 shipment. Crop conditions for winter wheat went backwards against pre-release trade estimates. Problems with planting new crop corn could ultimately support wheat futures as more strain is placed on the starch crops backs. There was a surprise within Stats Canada's acreage prospects. Canada's "all wheat" planting prospects came in well above pre-release estimates. The primary reason for weakness in wheat futures is technically related as we discussed late last week regarding the 8750 versus July CBOT SRWW futures. It represented long-term support, and we will regard the 8750 level as new resistance. There remains a chart gap from 8060 to 8160, which may draw futures down further than Monday's close of 8594.
Wheat New Crop Sales: focus on new crop wheat sales. The old crop-marketing year officially ends on May 30, which is just a month and a half away. The US has sold 117 million bushels of new crop wheat to date. The five-year average is only 34 million bushels. This is the largest amount of forward sales since 1996 for the 1996/97 crop.
Even though present US winter wheat crop conditions are less than average, globally the crop is healing (not fully healed by any stretch of the imagination) in the right direction, with larger 2008 volume when compared to 2007. Technicals are bearish for July wheat futures. At this juncture Allendale is willing to sell corrective rallies via call options. For more on specific recommendations, give an Allendale representative a call.
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