Negative Global Outlook For Grains

By Jonathan Barratt
 
The global picture in the grains markets continues to be negative regardless of the positive news coming from the US economy, China and steps being taken to resolve the debt contagion in the Europe. The main problem we are looking at is that the harvested acreage on US crops is expected to exceed that of 2011 by several million acres whilst global production looks robust. Export demand remains weak for US grains due to good weather conditions in other growing areas around the world which has resulted in abundant supplies.

 

Corn

 

Production in the US continues to see prices retreat from highs. The market looks at China then focuses on the production in the US. So far this year the US are expecting the fourth largest corn crop on record. The yield per acre is expected to be 146.7 bushels with the total US corn production is pegged at 12.3 billion for the current crop year. 

Technically, we continue to see good support coming in at US 570 as this level is close to the October 2011 and December 2010 lows so monitor it closely. If 570 is broken on a daily close then the bear trend resumes. 

Wheat 
 

Wheat like Corn and Soybeans received a lift from the geopolitical issues around the world, however this was sold into as traders realised that demand was simply not there.
Technically, keep an eye on US 605 as a break here sets the bearish tone with potential for a move back towards 590 and even 560. The move is compromised if 635 goes on the top side.

Soybean 

We continue to be long soybeans however the recent price action suggests a test to the lows again. At the moment keep an eye on US 1120 as a break below here will open the way for a move towards 1102. If already long we are happy to add to positions on a break through 1145 on a daily close. Otherwise, prepare for lower prices.

We continue to look for a low of significance and the break above 1145 that should conclude the low. Keep focused.

Rough Rice 

Rice looks to be consolidating after last week’s drop. We continue to be bearish the commodity and hold out for US 13.70. 14.00 looks to be good support for the commodity and if it breaks can expect lower price action. The target of 13.70 remains intact. 

Cotton 

The cotton markets continues to track sideways although we continue to hear good stories concerning the potential for tightness in the market going forward. Traders are happy to remain short whilst the harvest looks to conclude. Keep an eye on world-ending stocks as China continues to build on purchases. Already the country has booked 53% of the US season's commitments and with 92% of the USDA forecast already reached we would expect to see a reduction in world-ending stocks. In addition to this we note that as a result of the low prices farmers in India are holding back as much as 70% or the crop hoping for higher prices. 

We continue to suspect a low of some magnitude however we are not ready to commit to a trade. US 93.70 is an important area for us as a break here will see it back within the old range. 

The global picture in the grains markets continues to be negative regardless of the positive news coming from the US economy, China and steps being taken to resolve the debt contagion in the Europe. The main problem we are looking at is that the harvested acreage on US crops is expected to exceed that of 2011 by several million areas whilst global production looks robust. Export demand remains weak for US grains due to good weather conditions in other growing areas around the world which has resulted in abundant supplies.

 

Produced by Jonathan Barratt direct from the trading desks of Commodity Broking Services, Barratt's Bulletin provides expert analysis of commodity markets, global indices and foreign exchange movements. Click here to take a no obligation 21-day trial to Barratt's or to learn more visit www.barrattsbulletin.com. Content included in this article is not by association necessarily the view of FNArena (see our disclaimer).