By: Dan Hueber –
Grain and soy traders came into this week in a foul mood and nothing has happened over the past four and a part days that appears to have improved their disposition. If we were to close right now, nearby corn would be down 11-cents, beans 15-cents and wheat just over 12-cents. Thankfully there was nothing really “bearish” in the news, but then again maybe had there been, they could have gotten this out of their collective systems quicker and we could be looking on to other things such as what the summer weather might hold in store. In due time I guess. Interestingly enough, the action in the grain/soy has not created significant pressure in the major commodity indexes as there has been enough strength in metals, livestock and a few other to keep the negative sentiment in check. This is not to say that the downward corrective phase in commodities is complete, as I do not believe that to be the case, but by no means does it have the appearance of a new bear swing. I do believe we should have a reaction low in place for grain/soy as we move into the report next week but even with a rebound in price, we could still very well be trapped in a larger sideways pattern until we reach out to the summer months.
While I suspect it may be little more than growing pains it would appear that Cofco, the state-controlled grain company from China is still struggling to find it footing and direction. As we have written about previously, over the past several years they acquired both Dutch based grain company Nidera and the ag division of commodity giant Noble Group. The general assumption was the Cofco not only wanted to take a larger role in sourcing global grains for import into China, but would strive to become a much larger trader in the global grain picture competing with the likes of Cargill, ADM and Bunge. At one point, former ADM exec., Matt Jansen was brought into the steer the ship, but he departed suddenly back in January after just 18-months on the job. There have also been a few hiccups along the way, such as accounting and rouge trading mishaps at Nidera to the tune of around $350 million, which some believe could have created a shift in their supposed plans to be a dominant player on the world grain scene. While I certainly have no knowledge of the inner-workings at this firm but seriously doubt any long-term plans have changed and as I have written about in previous article, China appears to be positioning itself in several different sectors of ag, to not only wrestle more control of the products that move into that nation but also the production and trade around the globe. As usual though, they tend to take a longer-term perspective than do we here in the west. The new chief executive, Jingtao Chi, has stated that “Our focus will be further strengthening the seamless co-operation between international and domestic trading businesses by accelerating integration efforts of Noble Agri, Nidera and Cofco’s domestic trading business.” So, are well looking at the genesis of the next ag giant that will join the ranks and/or challenge the Cargill’s and others around the globe? While I cannot provide a definitive answer to that question, looking at global population patterns, potential for economic expansion and the belief by some that we sit on the cusp of the long-term cyclical East/West power shift, I would not want to bet against it. As the great Chicago architect/urban planner Daniel Burnham once said, “Make no little plans; they have no magic to stir men’s blood”, and it would appear the Chinese have taken this to heart.