Free Commentary

By: Dan Hueber –

Grain and soy markets have begun this new week with a bit of hesitancy as we are caught between very ample world supplies and the prospects (risks) associated with producing summer crops in 2017.  Add in the continued solid demand and a slightly positive technical picture at this time and I continue to lean towards the optimistic side for the short-term outlook, but that hardly means it will be without a few bumps in the road as well.

This afternoon the USDA will provide an update as to planting progress, and at this early date I would not expect to see the overall progress to have really fallen behind, but with a generally wet forecast through the balance of the month for the upper Midwest, the level of concern could be increasing.  Wet conditions continue to plague Argentina as well, and the Buenos Aries Grain Exchange now estimates that another 2.5 acres have been impacted by flooding.  While the overall production estimates remain solid, it has been a challenging and wet season for Argentine producers.  Some might have wanted to believe that their problems were over when a new administration took control but have rediscovered that mother nature has the ultimate word.  In Brazil though, no such problems have existed, and AgRural projects that the bean harvest is 87% complete and the first corn harvest 76%.

Even the macros are looking at little more than a mixed bag this morning.  Energy markets are fractionally lower encountering headwinds from the solid output in the US picking up the slack from OPEC.  Equity markets have moved back into positive territory after a rocky start, shaking off some of the global nervousness concerning the tensions with Korea with gold doing the opposite.  Do note that the tension did send buyers back into gold and spot futures reached up to the highest levels traded since the November election.  Last but not least, the dollar is struggling once again this morning.  While we have not yet extended below last weeks’ low and more importantly the March reversal low but overall, it would appear this market could remain in a defensive positive into the summer months.  No, that does not assure that it will bring immediate or additional buying over to commodities, but I suspect that at least psychologically, it could hold some of the bears at bay until we have a better look at the summer weather.