Morning Grain Market Research

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Bullies do not like to be confronted, and often when they are, they will quickly tuck their tails between their legs and scamper off to safety headed in the opposite direction. There would seem to be no question that for the past several months, bears have been bullying the grain and soy markets lower, with justification at times, but I have to believe as of late it was for little more than the fact that they were confronting a psychologically demoralized opponent and simply, it was the easiest thing to do. Obviously, that has come to a halt in the past 48 hours or so. There would seem to be no question that the planting, or lack thereof, reports that have been largely ignored until now provided the shock to their systems and now weather forecasts for the Midwest that call for possibilities of 3 to 5 of additional rains this weekend, has really struck fear into their hearts. If this turns out to be correct, I suspect many a farmer will be contacting their insurance agents to see what the stipulations to qualify for prevented planting claims. I had mentioned yesterday that July corn appeared to be close to posting an outside weekly reversal and we have now moved closer to reality, and in fact, if we do not slow down, could violate the highs of several weeks. The key though will be the close on Friday, and a finish above 3.68 would be a positive signal. The last time in recent history where this happened was back in January 2014, and that time, corn posted a 24% rally over the next 13-weeks. By no means would that necessarily occur this time around, and do not forget, we still have to close above resistance on Friday, but I would suggest that if it does, the bulls will take control of this market for now.

When market psychology shifts, stories that support that change and have been largely ignored, begin to flood in. Planting delays are a prime example, and this morning, there are a few more popping up. IEG Vantage, known to many previously as Informa, released updated acreage number and now projects 90.692 million acres of corn, which compares with the current USDA number of 92.8 million. Granted, most everyone has already determined we would lose intended corn acreage but to see it in print from a well know name, add a little extra credence. Of course, this would not bode well for beans as they bumped their bean acreage number to 86.437 million compared with the USDA now at 84.6 million. They also cut the spring wheat acreage number, taking durum down to 12.36 million compared with 12.8. Not a massive shift for wheat but there was also a news story out overnight that Australia is going to be importing wheat for the first time in more than a decade, it helps solidify the positive action in grains. In average years, Australia is the 4th largest wheat exporter.

This final item is by no means bullish for grain/soy, but we are seeing more honest updates on the hog situation in China. The Ministry of Agriculture and Rural Affairs estimates that in April the sow herd was 22.3% lower than a year ago and this is following the 21% drop in March. This will almost certainly not be the final word, and Rabobank continues to project a decline in the 30 to 30% range. While as I said, certainly not a bullish factor for grain and soy markets, it should be for the global meat trade. Gone are the days when the Chinese government can ask, or tell, its citizens that they need to tighten their belts and expect them to do so and they are fully aware that many a revolution has been sparked on empty stomachs. I would dare say; this is a more critical issue for that country than the trade war.

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