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Market Wrap: world events pressure commodities

Chinese corn demand will pull corn prices back up.

Wheat, soybean and rice world supply exceeds world demand and prices must drop. Higher dollars will limit export potential.

Prices are going to fall except cotton, for which supply will not meet even low demand. Expect cotton prices to hold.

Cotton Bullish news: Weekly export sales over 425,000 bales were above market anticipation. Housing starts in the United States increased and domestic fiber use followed. Cotton prices are holding within an established range as grain prices break down below support and that is a sign of strength. Fundamentally, demand exceeds supply.

Traders increased buy positions in cotton markets by 2,000 contracts in a week. Trader’s open interest is 45,000 buy contracts above sell contracts. Cotton has the third largest net buy positions of any Ag commodity.

Bearish news: Cotton markets are particularly susceptible to pressure from economic weakness in Europe and Inflation fighting policy implementation in China and India. Trader profit taking in cotton markets reflects economic problems.

U.S. production potential is bearish. Jobless claims were unexpectedly higher, foretelling less demand for new clothing.

Cotton is 60 percent planted and weather is favorable.

Corn Bearish news: Weather remains favorable for corn production and supply estimates continue to rise. Weather in the United States remains favorable for corn production. The crop is one of the earliest on record. One hundred percent of corn could be planted before May is over.

U.S. corn is 93 percent planted and 71 percent is emerged. The crop condition rating is high at 71 percent good to excellent. Planting will likely be completed this week.

Traders sold over 4,000 buy contracts and short positions increased over 8,000. Trader open interest is 100,000 buy contracts and dropping. Outside markets pressure from falling world stock market prices pushed grain prices lower. Export inspections of 40 million bushels are up a million in a week.

Bullish news: Weekly corn export sales exceeded all market estimates over 1.5 million tons. Ethanol exports also increased significantly. China not only bought 124,000 tons but issued permits to buy an additional 500,000 tons. Chinese corn imports are now expected to reach 3.5 million tons.

Farmer selling remains light in the U.S. and South America. Corn prices are supported because prices are already low and fundamentally, corn supply is barely meeting expected demand.

China now anticipates using 150 million tons of corn. However, they have the largest stored supply on record. China bought another 118,000 tons.

Rice Bearish news: World rice supplies exceed current demand. Recent world economic news including the debt crisis in Europe, Inflation fighting measures in China to slow Asian economies and neutral to negative economic news in the United States question the growth of rice consumption.

Fundamentally rice markets are weak with supply exceeding demand but technical charts were short term positive. Rice market trading is taking on a defensive posture. Exports are slow.

Bullish news: Political unrest in Thailand continues to support world rice prices. The short-term trend turned higher. Rice retraced earlier losses but turned lower again.

Soybeans Bearish news: The surge in world soybean supply is negative. South America has a bumper crop of inexpensive beans. China is expected to increase soybean acres and Canola oil acres. Canada has large supplies of stored Canola and the current crop is in excellent condition.

Weekly export sales of U.S. soybeans barely met market expectations 464,000 tons sold. The soybean production potential outlook is bearish. U.S. soybeans are competitive with South American beans but Canadian canola oil is going to China competing with soy oil.

Traders sold 24,000 buy contracts in recent profit taking. The sell contract open interest in soybeans is over 46,000 contracts. Long positions in the soybean market are down near 15,000.

Bullish news: China continues to favor U.S. soybeans over South American beans. China bought another 120,000 tons. Argentina has increased their biodiesel blend 2 percent, making the total blend 7 percent. Broiler production is up 3 percent requiring 3 percent more soy meal.

Despite recent high prices farmer soybean selling remains slow in the United States. South American farmers are reluctant to sell because of currency inflation. The value of soybeans in South America is increasing as the value of money declines.

Wheat Bearish news: Wheat markets are pressured from two directions. The weakened euro makes European wheat less expensive than U.S. wheat. Total world supply is not only heavy but increasing despite reduced world production.

Winter wheat harvest is under way and crops are in excellent condition. Australia had good amounts of rainfall over most of the continents wheat lands. U.S. winter wheat is 66 percent good to excellent. Spring wheat is 91 percent planted.

Weekly export sales near 456,000 tons were above USDA targets but below market expectations. Demand for U.S. wheat remains light. Trader open interest is 56,000 sell contracts above buy contracts. That is the largest open interest of any ag commodity.

Bullish news: France is dry and wheat production may be reduced. Export inspections were up 7 million bushels at 20 million. Exports were up about 50 percent over the figure reported for last week but that is only half the week.


TAGS: Outlook
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