Morning Futures Roundup

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Grain Markets Retreat Ahead of USDA Report

   Fundamentals
Grain bulls headed for the exits on Thursday, as traders were busy squaring-up their positions ahead of the release of the USDA prospective plantings and quarterly grain stocks reports this morning. Recent history has shown that trading activity can become extremely volatile following the release of the USDA estimates, especially if there are sizable differences in the government data and traders' expectations. The following are what many analysts and traders are expecting for the major grain markets:

Corn: Ideal early spring planting conditions are causing many traders and analysts to increase their estimates for U.S. Corn acreage this season, with the average estimate running near 94.75 million acres this season, which would be the highest planted Corn acreage in nearly 70-years! This sets-up the potential for a record Corn harvest this season, which will be needed given the tight old-crop ending stocks expected. Average estimates for U.S. Corn inventories as of March 1st vary widely, with a band of nearly 400 million bushels and the average near 6.150 billion bushels, which is down just under 400 million bushels from this time last year.

Soybeans: Those extra acres that are expected to go to Corn this season may take away acreage from Soybeans, though traders are still looking for a modest increase in Soybean plantings this season. Average estimates are coming in near 75.5 million acres, which is up from 74.976 million acres in 2011. This estimate may end up being optimistic if we do see a huge move towards Corn plantings as some traders expect. March 1st Soybean inventories are expected to total 1.381 billion bushels, which is up from 1.249 billion bushels last year. The wild card for Soybean prices remains China, and how much additional export business the U.S. will see due to lower than expected supplies out of South America this season.

Wheat: Wheat plantings are expected to increase this season, with the average estimate for all Wheat types coming in at 57.6 million acres, which is up from 54.409 million acres last year. Many traders are looking for an addition 1 million acres to be planted towards Spring Wheat this season, after heavy flooding in the Northern Plains last year saw only 12.394 million acres planted. However, there is some thought that producers up north may have also shifted to Corn, which could spark a "bullish' surprise in the Spring Wheat USDA estimate. U.S. Wheat inventories are expected to total 1.235 billion bushels, versus 1.425 billion bushels last year.

   Technical Notes
Looking at the daily chart for September Minneapolis Wheat, we notice the nearly year-old bear market has paused, as prices have held in a relatively narrow 60-cent trading range during the past few months. Prices are still below both the 20 and 200-day moving averages, and momentum has turned, weak with a current reading of 41.11. Data from the upcoming USDA report may be the catalyst that allows the market to break out of its recent price range. Support is seen at 750.00, with resistance found at 810.00

   
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