- New month, new money, or so the saying goes. CBOT markets moved sharply higher in early trade with soybeans the upside leader. Planting delays as a result of continued adverse weather was put down as the trigger for the move. Our take on the situation is that planting delays are most likely to affect corn acres and yield, and soybean acres will likely rise on any unplanted corn area. Consequently this rally (and here we refer to new crop rather than old) we believe to be a selling opportunity and not necessarily a call for consumer cover to be taken.
- Crop progress figures will be reported at 21:00 UK time today and trade expectations, according to a Reuters poll, are for corn to be 92% and soybeans at 57% planted. We will update in tomorrow’s report. Morgan Stanley have cut their forecast for US corn plantings to 93.5 million acres, which is some 4% below the USDA’s latest estimate, with output at 13.3 billion bu. If achieved, this level of output will beat the previous record of 13.1 billion bu set in 2009 albeit by a smaller margin than previously anticipated. The bank went on to warn that production risks were rising, citing adverse summer weather conditions as the primary risk factor. Summer heat in the key pollination period and drought in August headed the risk factors. However, with more usual weather and trend line yield the forecast stock to use ratio for 2013/14 based upon the lower planted are would be a relatively comfortable 10%.
- Hedge fund positions grew according to data released late on Friday, soybean and corn net long positions both grew as rain delayed plantings changed the mood of speculators. Current net longs are still some way below historic highs, which could pave the way for further additions to overall positions if conditions permit.
- The ongoing rainfall in the midwest has culminated in the wettest week so far last week with as much as 3″-6″ falling causing widespread flooding. Some midwest corn growers may be forced to claim on their “prevent plant” insurance policies. The cut-off date for planting has passed for a number of states as growers would be ineligible for crop insurance which proved invaluable to many last season.
- At this time we maintain our view at this time that rallies in new crop soybeans and corn are providing selling opportunities.