Should we prepare for another sequel? I have lost count at this point as to which this may be. Three, six, maybe eight, they all have begun to blur together by now. Of course, I am referring to the US/Sino relationship and the potential for another trade battle. With China tightening its grip on Hong Kong, using its typical heavy-handed means to stifle and suppress any opposition, President Trump has vowed to react with tough sanctions if they follow through, and will hold a press conference later this week accordingly. As you might suspect, China has already commented that if these are severe, they will retaliate by reducing purchases from the United States and have already instructed the state-owned grain companies, Cofco and Sinograin to suspend purchases of US farm goods. Of course, no one defined what “severe” might mean, so we shall have to wait to see how this unfolds in the days ahead. Evidently the shock value has not worn off as we have grain and soy markets all under pressure this morning.
It would seem that large speculators just cannot get enough of a short position in the corn market this spring. During the week ending the 26th, they sold another 22,355 contracts, bringing the total short futures position to over 312,000 contracts. Even more interesting is the fact that the managed money segment of this group continues to take on a larger percentage share of the holdings, and now represents 88% of the total. Of course, these numbers would not reflect the mini-bounce we witnessed in corn late last week, which may have pushed a few of them overboard. Regardless, this ship leans further and further to the star-bear-d side, but obviously, it is going to take a bigger wave than we have witnessed thus far to right it once again. Large specs were net buyers in wheat futures, having purchased nearly 11,000 Chicago wheat while selling just over 7,000 KC, and were net sellers of almost 10,000 contracts of beans. The only two ag markets I see that large specs are not currently short in are live cattle and coffee, and in the latter, the long position is negligible.
There is one commodity market where the bulls came out fighting this week, and that is Brent Crude. Here, we have gapped higher, stimulated on news that Russia and the Saudi’s, er,…I mean, Opec, may possibly be close to an agreement to extend crude production cuts for another month or two. If you recall, back in April, the parties involved agreed to a nearly 10 million barrels per day reduction in output. While those cuts were based on record output levels, nevertheless it provided the crude market with enough of a psychological boost to end the slaughter of the bulls. Do note; we are now approaching a huge weekly gap between 39.70 and 45.18 that was left back in March.
The trade is expecting the USDA to report an April soybean crush number around 182.5 million bushels later today. If correct, this would crush (pun intended) the previous record of 171.6 million, which was set in April 2018.
With only one month left in their marketing year, Ukraine grain exports have reached a record 54.1 MMT. This is over 17% greater than last year. This includes 28.4 MMT of corn, 20.2 MMT wheat, and 4.8 MMT of barley.
The current 6 to 10-day forecast is calling for warmer and even above normal temperature for the heart of the corn/bean production areas and for those in the southwestern plains, no relief moisture or temps in sight.
