- We have seen another day of higher levels, and sharply so, in Chicago markets in what appears to be moderate volume. We have seen soybeans move to new rally highs as rumours circulate as to how much the Argentine soybean crop should be cut as wet weather impacts harvest. Funds continue to pile in as gold rose as much as $21/oz, US stocks jumped in tandem with a rally in crude oil. Fundamentally these prices are arguable yet new money appears to continue its inflow and this is what is pushing prices still higher.
- There are suggestions that wet conditions will hit the Argentine soybean crop by as much as 10 million mt, somewhat above the 3 million mt indicated just a week ago. The hardest hit regions of Entre Rios and N Santa Fe account for around 13% of Argentine production, and Entre Rios has received more than 300% of normal rainfall since 1 April with N Santa Fe receiving over 220%. At this time it would seem that a realistic amount of the crop adversely impacted would be in the region of 7-8 million mt, if the damage on this area stands at 33% it would put total loss at 2.5 million mt leaving overall output at 57-58 million mt.
- US farm selling in corn and soybeans had been heavy on this rally as has activity by Brazilian farmers in soybeans. US farmers indicate that the soybean crop is profitable at current prices and there is a possibility that we will see acreage expansion as a result.
- We are seeing a significant change in market ownership as funds have been massive buyers once again, an estimated 42,000 contracts in grain and soybean futures has moved into fund ownership. The charts are extremely overbought with technical resistance being tested, clearly we are at a crucial time from a price perspective. Fundamentals are bearish yet the market is proving us to be totally wrong right now! Global stocks and demand suggest that current prices are way overdone but we should never forget, “The trend is your friend,” and until we see a price reversal to confirm that we are overdone it is little comfort. We continue to look for a “blow-off” top but until that is evident and proven suggest caution is the watchword.