- The US$ fell sharply vs.the €uro this morning as consumer prices were reported to have risen 0.3% indicating that QE is working across the Eurozone to stabilise the currency. Additionally, Greece offered a financial package which it hopes will break the logjam and secure a deal that will avoid an IMF default. This news along with some short covering in advance of Friday’s US jobs report placed the greenback under pressure, which also sparked something of a rally in commodities.
- Soybeans were reported to be 71% planted, which was below the 75% level that was anticipated, and compares with 61% last week and the ten-year average of 74%. Corn plantings came in at 95% (1% behind expectation and behind last year’s 94%), whilst the proportion rated good/excellent was 74%, unchanged week on week and a touch behind last year’s 76% but ahead of the ten-year average of 70%. Winter wheat rated good/excellent slipped 1% week on week to 44%, which compares with 30% last year and the ten-year average of 43%.
- From a general perspective, China remains a slow buyer of S American soybeans as their cash soybean meal market shows little, if any, signs of price uplift. Chinese meal markets appear to be languishing at a seven year price low and record soybean import volumes are likely to add further downward price pressure as stocks build in coming weeks.
- Central US weather forecasts offer 0.5” to 1.75” of rain for the N Plains and NW Midwest this week with much needed dry conditions across the S Plains and the rest of the Midwest. As conditions warm up they will encourage crop growth, in summary the US weather is favourable.
- As we move towards the end of the day it feels very much as if we have seen a “currency” dominated session as the US$ has slid to sharp losses vs. Not only the €uro, but also other currencies and funds have been in evidence covering short positions prompting commodity price gains. The large net short positions (as we have so often mentioned) in corn, wheat and soybeans has once again proved an “Achilles Heel” to the continuance of the longer term price downtrend. Some US$ slippage has been attributed to speculation that Greece could receive a financial “band-aid” from the ECB to avoid default. There is no indication as to whether, or not, Greece’s offer will find acceptance and we will doubtless continue to see volatile currencies heading into the remainder of the week and this will also have an impact upon commodities.
- Yesterday’s market action in Chicago suggested that funds added over 8,600 short soybean meal contracts on the downside breakout and over 9,600 long soybean oil contracts as that market surged higher. The big increase in position size was probably a good pointer to some sort of turnaround today, which has indeed been the case
- All in all, have we witnessed the seasonal market bottoms? Our inclination remains that the answer is, “Not yet.” Large fund shorts have left us vulnerable to spikes, as we have frequently suggested, and we do not yet see a fundamental shift in the “big picture”. Regrettably, it will likely take a while for the market to give back the recent gains but we still look for downside in what will undoubtedly remain choppy and volatile trade.