- Despite our thoughts yesterday that we would be seeing a classic Turnaround `Tuesday today, Chicago grains (corn and wheat) are all but unchanged whilst soybeans closed in positive territory. Fund buying has continued as May soybean futures pushed above the 200 day moving average, the last time this occurred was August on fear of adverse Midwest weather. Whilst there is no such threat right now it is the technical market status and imminent new crop planting season that has triggered the push higher. We acknowledge the jump in prices yet struggle to accept that the longer term fundamentals have changed materially, consequently believe that some protective measure needs to be put in place to ensure that opportunities are not missed. Matching physical purchases with a put option would give some such insurance and this can be discussed further if desired.
- From an historic perspective we see the rally in soybeans as contrary to supply fundamentals; we have more soybeans in the world today than was the case at the time of the end December or even October highs and harvest is fully under way in S America. Clearly we need to watch the position very carefully in the next days and weeks to look for a confirmation of trend or otherwise.
- Wheat losses in the US due to the weekend freeze fall into a very broad range of estimates ranging between 5 and 60 million bu. We have seen such conditions previously and feel that it is too early to place a substantial output loss as the crop has time to re-tiller and form a new head before maturity and harvest. Again close scrutiny will be the required in the near term. Interestingly global cash wheat prices have not reacted higher with abundant old crop stocks keeping a lid on prices at present.
- On balance we continue to favour a view that suggests we are close to a seasonal high price as the current move higher appears technical and chart based rather than fundamentally driven. Plentiful global supplies should cap upside before too long – unless other factors intervene!