By: Dan Hueber –
Whoever said no news is good news, was not looking at this morning’s grain and soy markets. The grains have gapped lower here to begin the week with double digit losses suffered in beans. While there is a little additional news out of South America, by no means is it introducing anything fresh to work with and as I have commented many a time in the past, bulls need fresh news on regular basis to grow.
According to AgRural, the harvest of the first crop of corn in Brazil stands at 34%, which is behind the normal pace of 45%. As far as beans though, they estimate that harvest is 58% complete, which is right on the 5-year average and is allowing the planting of safrinha corn to move forward. They estimate that it is currently 92% planted compared with an average of 90%. A little over a month ago, due to the late planting of beans, it appeared acreage would have been cut for this crop but with the price advance we have witnessed over the past six weeks in corn, it has provided to stimulus needed to change all of that. There were scattered showers in Argentina over the weekend but certainly not the quantity required to stop the deterioration of the crop, but most recognize that this late in the season, as a percentage, the largest damage has already been done. Sure, we could ultimately see bean production down around the 40MMT range, but that number has been bantered around numerous times already.
Managed money continued to buy last week and as they purchased 70,000 contracts of corn, 24,000 beans and 3,000 wheat. This moves them to long 233,000 corn, 208,000 beans and short around 36,000 wheat. This has pushed them to the outer limits of long positions for this time of year in beans and corn which could suggest their appetite for more will be diminishing for now.
At least we do have a little demand popping up this morning. The USDA reported sales of 206,000 MT of corn to Japan for the 2018/19 marketing year and 115,000 MT of corn to unknown for this crop year.
While not necessarily a primary reason for the dour attitude this morning, I have to believe a portion can be attributed to an increasing concern about a potential trade war. Tariffs begat tariffs and there is more and more discussion of retaliation for the moves the US have proposed, which in turn has turned the global equity markets lower. European markets began the slide and while not severe at this point, the S&P 500 swung from a higher open to lower values now. Heightening the tension and apprehension is the fact the Fed will be meeting later this week and will most likely be raising interest rates and realistically more important, members of the G-20 will meet in Buenos Aires this week, and the rhetoric could be a heated as the weather has been in that nation this year.
