- A lot has happened in the last two weeks although nothing that has left us with a dramatically changed perspective on longer term price perspective. We have seen the funds continue their net short positions, indeed growing corn, wheat and soybean positions to record short levels once again as well as giving us one week where the growth in net short reached a record itself. As we know there is an inherent danger in such sizeable positions, discussed here many times, and the risk from any heavy short covering exercise has the potential to move prices significantly as well as causing financial pain to those with exposure. The market today has witnessed such short covering and prices have continued their recent upward momentum, though it should be noted that there has been little, if anything, in the way of fresh fundamental news. Our take therefore is that we are looking at a new “price top” forming in coming days as fund covering reaches its conclusion for now. It has been interesting to note US farmers selling corn on this latest upturn on price, and it is likely this which has limited price upside, cash basis levels have declined. This was the situation last week in the soybean market as funds exited some of their shorts. Dryness appears to be continuing in the US W Plains and this too has encouraged fund short covering.
- The Egyptian Government finally allowed a devaluation of their pound vs the US$ with a 13% weekend devaluation, and they promised to allow the pound to trade more freely which should help reduce the country’s dramatic shortage of dollars. However, the devaluation does make imported world commodities more expensive, including wheat. Many argue that this is just a first step by Egypt on its currency and an even weaker pound relative to the USD is likely in coming months.
- Huge peaceful protests occurred Sunday across Brazil against President Dilma. The protests placed fresh political pressure for her impeachment although it is unknown when, or if, such an impeachment process will start or how long it will take? However, a trucker’s strike never really gathered any momentum and the movement of interior soybeans to port has not been interrupted. Brazil is loading record tonnages of soybeans and waiting times to berth are starting to decline which should start to pressure their fob basis offers.