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Ag Marketing IQ
Basis is the decision maker on making cash sales. If basis is strong, it tells you to sell physical ownership. If basis is weak, it indicates the market does not want your product and will pay you to hold it until a future date. Once the basis has attempted to get the physical ownership to move, then the spreads have attempted to get the physical to move, price may follow. You should stay optimistic about higher price once a sale has been made.
Most charts used in grain market analysis show a single variable over time. Prices, yields, exports and the like. Sometimes these are shown as bars, sometimes as lines. A scattergram is different. It combines two variables, one on each axis, horizontal and vertical, into points that appear on the chart. A handy feature built into Excel automatically calculates the statistical correlation between the two variables and plots it as a trend line on the chart.
It will be interesting to see if China decides to buy some U.S. wheat. Those rumors exist and I believe it is a likely outcome. However, will this take place soon, or not until the U.S. wheat harvest is closer to its arrival? If China buys U.S. wheat, I think we should seriously question the China wheat data in today’s report. If that is the case, how can we be confident in any of China’s statistics, which they guard as a state secret?
As we are still only in the preliminary stages of dealing with coronavirus in this country, the fear selling will likely continue for a few weeks until cooler heads prevail, and the virus is curtailed. There will be economic stimulus packages announced by the government to help in economic recovery efforts, but my hunch is that the selling continues into month end and quarter end. As commodity prices find their lows, there will be golden opportunities that arise which will help your farm.
USDA’s weekly grain export inspection report, out Monday morning, failed to contain a lot of optimistic data, as corn, soybean and wheat volume all decreased week-over-week for the latest reporting period, through March 5. Corn performed the best overall, as it has done in recent weeks, but remains increasingly unlikely to match last year’s tally.
USDA’s March World Agricultural Supply and Demand Estimates report, released Tuesday morning, came in exactly as market analysts expected – relatively quietly. Among the highlights: U.S. ending grain stocks were unchanged, Russian wheat was forecasted higher, Australian wheat production dropped, and Brazilian soybean production for 2019/20 increased 36.7 million bushels to more than 4.6 billion bushels.
USDA’s latest weekly export report, covering February 28 through March 5, had a mix of bearish and bullish news. Soybean volume fell to a marketing-year low, wheat sales slipped 17% from the prior week, but corn boomed 53% above the prior four-week average and topped all analyst estimates.
Export sales were reported on four days this week, the most often since late January when four sales were issued in one week. This week's sales included corn to South Korea and soybeans to unknown destinations.
Corn followed the recovery in global stocks this morning as July futures traded $0.0425 higher after hovering near six-month lows yesterday. Central bank stimulus efforts helped soybean futures from flirting with 10-month low price levels. May futures prices rose $0.1025 in pre-market trading. May soybean oil prices rose $0.4. The wheat complex followed the recovery in the global markets this morning.
Friday brought very little positive news to the grain markets. Corn managed to firm slightly on some mild short-covering, but worries over large South American crops continue to apply downward pressure on soybean prices, which were down more than 1% again today. Wheat prices suffered mostly small losses on some technical selling as traders continue to worry about the potential global economic fallout of the ongoing coronavirus pandemic.