By: Dan Hueber –
It would be a stretch to manufacture much of a fundamental reason but it was nice to see the grain markets begin this week with a rebound, while the soy complex held relatively stable. One has to suspect that shorts had become just a bit uncomfortable ahead of todays supply/demand report and elected to move to the relative safety of the sidelines.
Managed funds have increasingly turned dour on the agricultural sector and by the end of last week, the short position they are holding for this group overall had increased to nearly 99,000 contracts. This is the largest short-position they have held since March of last year. Granted, one would be hard pressed to find a current fundamental reason as to why their biases would be incorrect but this would seem to smack of getting the cart in front of the horse. It is only April. In fact, I read a quote by one of the fund managers from a major bank that stated “we struggle to find additional bearish arguments” at least for now and that “we caution that any weather risk of production could drive considerable short covering across the markets.” It would appear that the managed fund vessel is already listing quite heavy to one side and episodes such as yesterday could become more frequent as we move into weather sensitive months.
The first nationwide planting report was issued yesterday and while we remain basically on par with average, it is still a bit disappointing for some in the trade who a couple weeks ago were looking for an early start. As of this past weekend the USDA estimates that 3% of the corn acreage was in the ground, which is right on the historical average. While the deep south has made solid progress the mid-south or southern plains have struggled. Kansas came in at 4% compared with 8% on average, Missouri at 5% versus a normal 12% and Kentucky at 4% compared with an average of 9%. Of course, as we have discussed many a time, it is difficult to get markets excited about planting delays, particularly in early April.
Weather has been a growing concern in Argentina though as wet weather further pushes back harvest in that nation. Localized flooding was reported over the weekend in the province of La Pampa and I read overnight that they received more rain in the first three months of this year than they would normally see in an entire year. According to the Buenos Aires Grain Exchange, nationwide bean harvest has reached 5.9% complete (they like to be precise) compared with 7.6% last year. Dr. Cordonnier thus far has kept his estimate unchanged at 56 MMT. Further north into Brazil though, there have been no such issues and the bean harvest is estimated to have reached 82%, which is 4% ahead of average. Dr. Cordonnier has left his bean estimate unchanged at 109 MMT but did push his corn figure higher by 2 MMT to 90 MMT due to the increased chances for rain now in the forecast.
While I would not expect to find any major surprises in the report later this morning, once again here are the trade estimates; Ending stocks for corn 2.352 billion bushels, beans 447 million and wheat 1.147 billion. The average estimate for world ending stock for corn are 221.81 MMT, beans 83.91 and wheat 250.24. For the Brazilian crops the trade is looking for a bean number of 109.86 MMT and corn at 92.43 with the Argentina estimates at 37.70 MMT for corn and 55.89 for beans.