In March we should expect traders to anticipate a decrease in planted acreage in the March 31 report of 1 to 3 million acres. Thus, corn should find strength in the last half of March and early April as the market will need to secure acres to meet record demand. Commercial interests will view pullbacks in the market as buying opportunities with forecasts for a wet spring followed by a La Nina event that could produce drought-like conditions across the Midwest’s key growing regions during the heart of the growing season.
Thus commercial entities, as well as large speculators, will want to be well ahead of the growing season. With this being said, producers must remember that seasonal highs are normally scored during April for corn as values rally to secure enough planted acres to meet demand, and as price levels rise, producers should be offsetting price risk by making cash sales and using options to manage the risk.
Unlike the start of the last couple of growing seasons, the large speculative funds and index funds are currently net short over 63,000 contracts rather than holding huge net long positions. If the funds are given a reason to cover their shorts, a drought for example, will result in a massive rally as these funds buy back their short positions.
March soybeans watch
The key pod setting stage in South America should be completed by March 15, leaving the market to remove any weather premium that may remain in values.
The next monthly USDA supply/demand report will be released on March 11. The USDA report should show very little change in U.S. ending stocks and with the South American growing season effectively over as well as an expectation for an increase in U.S. seeded acres in 2009, look for prices to work lower after the report.
In the March 31 acreage report, the trade should be expecting an increase in U.S. soybean seedings of 2 to 5 million acres. Large speculative traders are slightly net long, about 14,900 contracts as forecasts for a La Nina event by NOAA has helped to fuel speculation of drought-like conditions across the Midwest’s key growing regions. Technical breaks of 20- to 40-cents should be well-supported by commercial entities, as they begin to position ahead of the growing season, wishing to extend coverage prior to the growing season, in case prices rally sharply on a weather-related event.
March wheat watch
In the month of March, growing conditions for the U.S. winter wheat will be the main driving force for prices.
The winter wheat crop that is currently lying dormant makes up approximately 67 percent of our exportable wheat. Winter wheat’s growing cycle begins by the end of March and the market will remain sensitive to weather issues.
Winter weather across the Plains has been very dry so far, which has pressured winter wheat ratings. Remember, that in the long term, the better the condition of the wheat crop, the more attractive it will be to foreign buyers, eventually leading to a demand-driven bull market, following winter wheat’s harvest.
Conversely, low-crop ratings will rally prices during a supply market, but will drive foreign buyers away due to the poor quality of the wheat, especially if other foreign countries have better wheat to sell.
If the U.S. produces high-quality wheat, importers will book U.S. wheat in late April and May for shipment after harvest. Exports are well-below last year’s export pace and demand in March is seasonally weak.
In addition, the Australian wheat crop is not only financially competitive to U.S. wheat, but is also higher quality, leaving the U.S. as the second or third port of origin for world importers. The March 11 USDA crop report will not update production estimates, leaving poor weather as wheat’s only hope for a rally during March.
Expect short covering ahead of the planting intentions report at the end of the month. Spring wheat futures, traded on the Minneapolis Grain
Exchange, should find strength into the planting intentions report as the market will bid against corn and soybeans for seeded acres this spring.
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