- Well, despite our thoughts (hopes) yesterday it seems that the fund buying continues, particularly strongly in wheat and corn and to a lesser extent in old crop soybeans. Prices have moved higher with July wheat breaking $5, December corn close to $4 and July soybeans $10.14. Higher levels indeed!
- Soybean volumes have been huge, record levels yesterday, and attempting to predict when this is going to end is difficult to say the least. The volumes traded point towards market exhaustion, but we have said this before and we would be very cautious of holding long positions at this time.
- Yesterday Brazil announced a reduction to 0% on its corn import levy from non-S American sources in an attempt to stimulate farmer selling by encouraging (US??) imports.
- We would reiterate our previous thoughts that the rally in US wheat values has litte, if anything, to do with wheat fundamentals! One can maybe argue that Indian wheat stocks are down slightly, but key private sources in Russia, Ukraine and the EU are raising their crop estimates while the US HRW wheat crop is entering its reproductive period with an abundance of soil moisture. The world is on track to produce another record wheat crop which will further build stocks. It is hard to fundamentally justify the Chicago wheat rally with FOB world wheat offers little changed. The Chicago wheat rally is all based on fund short covering and the flow of money!
- There have been suggestions that global soybean and grains demand is expanding, yet there is no evidence that this is the case. Exporters are not seeing consumers chasing these higher prices with enquiry, China is, at best, a tepid buyer of soybeans at these prices and farmers appear very happy to make sales at current elevated prices. If we were witnessing a severe drought in EU, US or Black Sea/FSU regions the current market condition would make more sense than it does right now. The flow of money into crude oil, soybeans and grains is best described as “hot money” betting on improved global economic conditions and it will only end when this “hot money” stops flowing!