This Week in Grain 2/28- Monthly Wrap

Moving back to a shorter time frame, firmer markets is the theme this morning, although still below where prices opened yesterday.  After rallying to the highest levels since August, Chicago wheat has fallen like a stone, dropping in six of the last seven sessions giving back more than half of the 73 rally we saw come in since the Dec delivery started.  This is spec and farmer liquidation at its finest, I believe the farmer is done for now while the specs probably have a little more to go but not much. What’s most surprising is probably the way the March Chicago wheat contract is following the exact same road map as December, September and July wheat before it.  It rallies in the period ahead of first notice day (price or roll day for farmers on basis contracts), followed by heavier than expected deliveries and a smashing of the front-month spread before futures take out support and give back much of the rally.  If this trend holds, the short term lows in corn and wheat will be made today.

South American weather remains promising for production,  with drier/warmer weather featured across Argentina, while near to above normal rain drops across N and C Brazil. The Brazilian rains could cause some slowdown of the harvest, but that shouldn’t be an issue as the line at the ports is long anyway. One note for beans, this morning I look at FOB offers from Argentina, Brazil and NOLA and the US is now the most expensive. Its only by a couple of dollars but it is higher none the less.  I think we should start to see the bean export sales come down and settle back into more historical patterns.  I like the bean markets as I look at the charts from afar, but I do not really like the fundamentals.

Dec 17 cotton is back above 74 as the front month May and July positions lead the way.  We have seen precipitous long fund covering show up in the CBOT markets but cotton maintains this massive strength at last year’s highs. US export sales will be watched on Thursday for even more buying after last week.  The bears will continue to point to a massive jump in US ending stock supplies with a normal yield.  Traders I read are looking for higher planted acres for cotton in China and a 7% jump in India as well.

IN other news, plains monthly crop condition ratings pegged 43% of the Kansas wheat crop GD/EX, down 1% from the end of January. But, the Oklahoma wheat crop rating improved 10% to 43% while the Texas rating was up 4% to 34%. NASS will start reporting national US wheat crop conditions during the first week of April.  We want to be long ahead of that, as demand stories exist now.  Maybe we can see a supply side story join the party as the Q1 ends.

I look forward to seeing everyone who can attend the Commodity Classic at our event tomorrow evening on the river walk. It appears to be a solid crowd, can’t wait to see you all.  I am going to try to post from San Antonio but don’t hold me to it.