Grains were tempered overnight following yesterday’s rally on new USDA data. Meanwhile, equity markets and crude oil pushed higher trying to form a bottom after the steep sell-off that started the year.
Overall, USDA’s fresh data was mostly neutral in terms of its content, but it elicited a bullish reaction thanks to large spec & hedge funds that had been heavily short going into the report. Without fresh bearish news, the shorts exited positions and pushed the market higher, but the bullish response was muted in the day session with corn closing at the mid-point of the day’s range and soybeans closing 30% below the day’s highs. For soybeans, we need to see March clear $8.81 and March corn to clear $3.64 to see another round of short-covering.
In wheat, traders got at least one bullish number, which was a much smaller than expected US winter wheat seedings estimated. USDA pegged 2016 winter wheat acres at 36.61 MA versus an expectation of 39.32. This would be the smallest number of acres to winter wheat since 2010, and plantings of one class, hard red winter wheat, were the lowest in at least 30 years. But, as per usual, wheat has many overhanging negatives still in place as world carry-out increased from 229.86 MMT to 232.04 MMT. Also, overnight French officials pegged soft wheat stocks at 5.8 MMT, up from 5.2 last month and 2.5 last season.
Oil prices rose for the first time in eight days on Wednesday as positive Chinese trade data and an unexpected draw in weekly U.S. crude oil inventories gave investors reasons to buy crude futures. Crude inventories fell by 3.9 million barrels in the week to 480.071 million, compared with analysts' expectations for an increase of 2.5 million barrels. Crude stocks at the Cushing, Oklahoma delivery hub fell by 302,000 barrels, the API said. China reported exports dipped just 1.4 percent in U.S. dollar terms in December, compared to forecasts of an 8 percent drop, positively surprising world markets.
The risk of trading futures, hedging, and speculating can be substantial. Grain Hedge is a dba of Foremost Trading LLC (NFA ID: 0307930)
