- Managed funds are holding their largest net short ag position at year end on record, and the 5th largest net short for any week on record. This heady fund net short ag position started in June, and accelerated into the end of the year. The fund short itself is not bullish, but it will add to upside market velocity if a fundamental trigger point such as adverse S American weather were to develop. The market is set up a little like late June if the January WASDE report does not hold any surprises.
- Morning trade in Chicago has been mixed with corn, wheat and soybeans all trading either side of unchanged. Crude oil pushed above $61/barrel for the first time since June 2015with the CRB Index testing its prior monthly high. The next target for March WTI crude oil futures is $62.58 the early May 2015 top. If this resistance level is reached, and breached, the next upside target would be $75-$80/barrel. Inflationary talk is rife in Chicago and the question of what it means for the grains is, as of today, unresolved. Next week’s January WASE report may offer some clues although it seems the majority are anticipating a bearish report for corn and soybeans. Maybe a neutral or positive report would be construed as bullish.
- First fields of soybeans are being harvested in N Brazil with producers in Mato Grosso reporting yield levels of 55 bags/ha, around two bags below last year. The harvest will be slow to move south based upon planting dates. China appears keen to receive soybean offers for Feb/Mar shipment with some new demand being met by the US. Brazil is slow to offer based upon late planting and a relatively depleted old crop “pipeline”.
- There is a bull story developing in soyoil amid lower yield and a sharp rise in biodiesel demand. Soyoil should gain on soymeal with normal Argentine weather. However, the forecast looks more concerning and drought issues are likely to emerge by mid January. We anticipate hard wheat gaining on soft in the weeks ahead on winterkill concerns and historically low seeded acres. This is no time to be overly bearish corn, soybeans or wheat.