Grain markets are finally showing something other than red this morning. After selling off most of the week we have corn up 12 old crop and 7 in the new crop. Soybeans are up 5 and wheat is up 3.
It looks like a major market low in new crop corn and beans that was formed yesterday on the lower open. That was day three of severe liquidation of speculative longs, while the Funds piled into short positions in corn and wheat at the beginning of the growing season in the US. The Funds are probably going to show up as short beans on the CFTC report this afternoon. Yesterday I saw commentaries that corn was headed to 4 dollars and beans down to 10 dollars as inflation adjusted prices with these carryout’s by the USDA at 2,200 in corn and 330 in soybeans warranted such a move. I don’t think we get that low, especially this early with a long growing season ahead of us. Upside moves will be tough given the lack of demand for old and new crop commodities. Brazilian corn into China is currently .65/bu cheaper than US corn which explains the recent cancellations.
A decrease in open interest in corn is a good sign that a low is being put in place as the at least the Funds are adding even more to short positions.
The Wheat Quality Council Tour estimated Kansas wheat yields at 30.0 bpa at the conclusion of their three-day tour, down from a five-year average of 45.6 bpa and the lowest since at least 2000, though still above the USDA May estimate of 29.0 bpa.
When you look at the map of US weather over the next ten days you can see the formation of a doom of dry air setting up over the Central US. Rain is pushed up into the Canadian Prairies where it’s been very hot and dry over the past few weeks. Rain is also pushed out into Texas, Oklahoma, and Kansas. Much has been made this week about the influence of an El Nino pattern producing above average yields.
Have a Safe Day!