- Managed money increased their net long position in the week ended Tuesday to 296,232 contracts, a gain of 48,309 in US ag future. A year ago, funds were net short 323,000 contracts of US ag futures showing the big change in the ag market ownership. Fund managers are bullish on US ag futures on the back of dire Argentine crop loss and concern for Central US weather conditions. The large net fund ownership has us pondering the potential for Chicago grain and soy futures to score a normal seasonal high in the 1st half of May.
- Higher overnight trade in soybeans gave way to profit taking ahead of the weekend. Market news was limited and funds were not anxious to press their bull position ahead of the weekend amid geopolitical concerns. Last week traders worried over Chinese trade retaliation, and this week it is Russia/Syria. Funds ended as sellers of 5,200 contracts of soybeans. Soybean crush spreads were 3-4 cents higher on Friday, but the spot spread finished nearly $.30/bu lower for the week, and close to $.50 under last week’s high. Price movements in the crush spread have recently been greater than changes in the underlying soybean and product markets, but despite this week’s decline, the spot spread is still holding at a record seasonal level, while July and August margins are also at or near similar levels. Chicago is telling processors to keep plants running. China March soybean imports at 5.66 million mt were down 11% on last year and soybean imports are on par with 2017. Funds trimmed their soybean long by 5,000 contracts to 176,000 contracts. Soybeans appear caught in a range of $10.20-10.80 through planting. S American soy crops are going in differing positions with Brazil getting larger and Argentina smaller.
- Corn ended the day 2 cents lower, and traded in just a 7-cent range this week. Wariness over US/Chinese trade issues as well as coming S Plains rains weighed on corn today. We also note that Brazil is now offering summer delivery fob corn at levels 10-15 cents below US Gulf origin. So, for the first time in months, the global feedgrain landscape is more competitive with respect to trade. Funds on Tuesday were long a net 174,887 contracts of CBOT corn, up 35,000 on the week but, the position is not excessive and fits well with supportive fundamentals. Funds have likely sold a net 5,000 corn since Tuesday. Ongoing back-and-forth trading is expected into the USDA’s May WASDE as both the bulls and bears grapple over large old crop supplies and new crop weather. We caution against turning bearish on breaks though. Crude hit new rally highs on heightened geopolitical tensions and it is unlikely that lasting warmth is established across the heart of the US Ag Belt by May. The Ensemble weather forecasts maintain complete dryness across Brazil’s central safrinha corn belt beyond Apr 20. There is more than enough supply uncertainty to underpin breaks,July corn has support below $3.90
- US wheat futures fell another 6-12 cents as the EU and GFS weather models are in general agreement on soaking rain late next week in OK, KS and NE and as Russia’s ruble hit new 17-month low, thus raising incentive for producer sales and which will work to keep fob offers competitive, indefinitely. In Ruble terms, Russia’s domestic market has actually rallied substantially over the last month as exporters scramble for supply, but weakness in the currency there has more than offset this, and so cash fob offers in Russia are unlikely to extend their recent rally. The EU weather model in recent days has trended wetter across the Plains, but it is very important that precipitation materialises as forecast next Friday-Sunday. Even then, Jan-Apr precipitation in KS is likely to reach only 4.0-4.3”, half of last year’s total and some 35% below normal. Some measure of HRW crop improvement is certain, but follow up moisture will be needed. Also this weekend a lack of rain and elevated windspeeds will cause moisture deficits to worsen, not improve. Once again wheat wheat’s rally was unsustainable. However, following the 20- 30 cent break and amid a net fund short of 55,000 contracts in Chicago, a bearish outlook is not advised. Fair value is pegged between $4.70-5.10 July Chicago.
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