I am not sure if they are quite as popular today, or even in print for that matter, but as a youth, I enjoyed the stories about Hans Brinker, the Little Dutch Boy. Part of this could have been due to the fact that I really enjoyed ice skating, and in the story of the Silver Skates, you found not only skating but also lessons about sacrifice, virtue, and helping others in need. While there was no skating involved, the other story of little Hans Brinker that was quite popular and invoked the same virtues was The Hero of Haarlem, which is the tale of when he stuck his finger in the hole of the dike while his little brother ran for help and by doing so, saved the town of Haarlem from being swallowed up by the sea. By now, you are surely wondering what all of this has to do with the price of corn, beans, and wheat, and the short answer is nothing, but I could not help but think of this story while watching these markets become swallowed up with selling last Friday. The water levels have been rising in the commodity reservoir for months and months. While no doubt there had been leaks showing up here and there in the dike that was being ignored by many, without a Hans Brinker to step up and plug them, it was inevitable that it would fail. By no means should this be viewed as a complete failure, as neither corn of beans can ill afford to do anything that would encourage additional usage until we get a good look at acreage and crop potential in 2021. This breakdown just let some of the pressure off for now, and prices this morning have already begun to rebound. The question that remains is how quickly can things be rebuilt, and will some try and build an even taller dam this time around? Those questions should be answered between now and the end of March.
Of course, much of the pressure against this metaphorical dam was provided by large speculators, and even prior to the housecleaning on Friday, we were seeing a little leakage. During the week ending January 19th, large specs sold 19,641 contracts of corn and 12,734 contracts of beans. Even then, this left them with long positions of 145,790 contracts of beans and a whopping 415,715 contracts of corn. No doubt, these were reduced on Friday. During the week, large specs bought 9,600 contracts combined Chicago and KC wheat, sold just over 7,000 contracts of bean oil, 7,800 meal, and 1,357 cotton.
The weather picture in South America continues to look encouraging for farmers in those nations moving forward. While it is certainly not in the bin just yet, Brazil should still be on track to set new production records, and we cannot lose sight of the fact that they will have product available for export once again in only a few weeks. Note that while the Brazilian Real is up from the extreme lows posted last May, it is still 20% below where it was trading one year ago right now.
Looking at the other macros as we begin the week, we find metal and energies a bit higher, financial instruments strong, equities lower, and the U.S. Dollar higher.