Grain Prices Fall on Higher USDA Stocks Estimates
???? Today’s Spotlight Market
Strong demand for Soybean Meal has kept U.S. Soybean crushers busy, spurring demand for old-crop Soybeans, which is keeping old-crop supplies tight. Demand is strong enough that some processors are willing to pay a significant premium to pry old-crop supplies from storage.
With current estimates still looking for a bumper Soybean crop this season, bullish old-crop/new-crop spreads have rallied sharply, with the widely watched July/November Soybean spread once again approaching a $2 per bushel, July premium to the November futures. This is the highest this spread has traded since October of last year, and we may see the July premium continue to widen in order to help ration tight old-crop supplies ahead of the harvest this fall.
???? Fundamentals
The USDA May crop report reaffirmed the belief that a rebound in U.S. crop production this summer may help replenish tight inventories this fall. For Soybeans, the USDA estimates 2013-14 carryout at 265 million bushels; this was 26 million bushels above the pre-report estimate and more than double the 125 million bushel carryout for the 2012-13 marketing year.
The potential for a record 14 billion bushel plus Corn crop this season allowed the USDA to forecast 2013-14 Corn carryout at 2.004 billion bushels, which is well above the 1.973 billion bushels some traders were expecting. 2012-13 Corn carryout was raised by 2 million bushels to 759 million bushels from the April report.
Other items of note from the USDA included higher winter wheat estimates for this season’s crop, with U.S. producers expected to produce 1.486 billion bushels, vs. 1.477 bushels expected.
???? Technical Notes
Looking at the daily chart for November Soybeans, we notice prices holding below the recent consolidation range, although any attempts to move below psychological support at 1200.00 have been met with buying interest. Prices are hovering near the 20-day Moving Average (“MA”), but are nearly $1 per bushel below the longer-term 200-day MA.
The 14-day RSI is neutral to slightly weak, with a current reading of 43.26. The lows made back on April 24th at 1186.50 looks to be the next chart support level, with resistance found at the high made on April 30th at 1240.25.
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