Roundup: Chicago agricultural commodities end higher over week

Chicago Board of Trade (CBOT) grains futures close higher over the week which ended Jan.13, mostly on the United States Department of Agriculture (USDA) data.

The most active corn contract for March delivery rose 0.5 cents weekly, or 0.14 percent, to 3.585 dollars per bushel. March wheat delivery rose 2.75 cents weekly, or 0.65 percent, to 4.26 dollars per bushel. March soybeans added 51.5 cents weekly, or 5.18 percent, to 10.4625 dollars per bushel.

The commodity futures price index compiled by the Commodity Research Bureau (CRB) futures continued to rally this week with soybeans, gold and energy futures continuing their advances. The CRB closed at a new 23 week high with the next upside price target being the June highs at 436 points.

The CRB appears to be gaining upside momentum with an open upside chart gap holding from late October. Traders would view any rise above the June highs as confirming a more bullish environment for commodities -with inflationary price trends starting to grab attention.

The difficult question is whether this bullish raw material trend can be maintained amid a risking U.S. dollar? So far, the rally in the U.S. dollar has not hindered the commodity advance with hints of reflation being offered. Deflation has clearly ended as there appears to be a quickening of the velocity of money. Analysts hold to a moderately bullish outlook for commodities and the U.S. dollar.

Corn futures rallied ended near unchanged, and again failed at major technical resistance. The USDA's January data was neutral, and quarterly stocks lacked any excitement. However, the data does confirm a lack of needed demand growth, with this month's draw-down in stocks solely a function of a marginal cut in production.

Brazilian weather has improved rather quickly since early January, too much rain continues to fall across Argentina, and end users will be active in extending coverage on breaks.

Futures trading company AgResource's fundamental research continues to point toward a range of 3.35-3.75 dollars through late March, at which point it's back to monitoring Northern Hemisphere planting or growing conditions.

AgResource suggests clients should continue to trade corn in the long-established range, and only adverse weather can materially alter this. Also note that US corn seeding are likely to be a bit higher than expected amid this year's sharp decline in winter wheat area.

U.S. wheat markets ended this week widely mixed. The Chicago Mercantile Exchange (CME) futures ended 2 cents higher, Hard Red Winter (HRW) wheat futures ended 10 cents higher and spring contracts surged 30 cents to a new 18-month high on a continuation basis.

Quality remains an issue, and assuming normal abandonment and trend yield Hard Red Summer Wheat stocks will, indeed, drop to the lowest level in 5-6 years. But otherwise there's no shortage of US or world wheat, and there's not likely to be one in 2017/18.

Despite new crop acres being the lowest since 1909 when records began, bulging carryover stocks and a lack of domestic demand growth will keep U.S. end stocks at or above 1.0 billion bushels into 2018.

World stocks are likely to stay near 240-250 million tonnes with normal weather, and it's still left to export demand to substantially alter the U.S. balance sheet. This, in turn, requires widespread adverse weather in the EU or Black Sea this spring summer, and analysts expect spot CME futures to continue in a range of 4.05-4.40 dollars into April.

Weather will indeed be more important this year following a 4-year bear market, but analysts expect very little in terms of price direction without a drought.

Soybeans were range bound through the first half of the week on positioning ahead of the Brazilian and U.S. crop reports.

The Brazilian crop report expected increased estimates for production, while the market was surprised by a slightly smaller U.S. crop and stocks estimate. This triggered late week buying that had March soybeans nearly 0.52 dollar higher for the week.

Fundamentally, U.S. soybean stocks are record large, while China continues to import soybeans at a record pace, so the price outlook hinges on South American crops.

The Brazilian harvest is underway and January exports are expected to be well over a year ago. The weather forecast holds rain for the driest parts of Brazil, while South Argentina looks to remain dry.

Technically, spot soybeans were back above all major moving averages at the end of the week. Analysts look to start adding to sales on a rally above the high scored back in November. Endit