- The week has started in positive mode, from a pricing perspective, with pricing boards displaying green as weather prospects contemplated warmer and dryer conditions in the near term forecasts. The forecasts were enough to trigger some fund short covering which has raised awareness of size of their short (or small long) positions and all which can go with them. To counter this, the Pro Farmer crop tour, which is currently under way, has suggested central Ohio is moving towards corn yield and soybean pod counts ahead of their three year averages and weather conditions assisting with crop potential (according to Reuters reports today).
- Higher prices have encouraged farmer selling, particularly in Brazil where it is estimated that last week alone in excess of 2.5 million mt of soybeans were sold by growers. We have reported in recent weeks of the likelihood of S American plantings favouring soybeans from a purely economic standpoint with gross margins on the oilseed crop significantly ahead of those from corn.
- Price action over the rest of the week will be interesting, will the bulls be able to grasp the new weather data and turn it to their advantage, and higher levels, or will the bears regain dominance with strong global fundamentals and resume the grind lower. We will watch with interest.
- Our currently preferred view is that we are seeing a “bounce” (dead cat springs to mind) in prices which have declined significantly and global supplies appear to be sufficient to put a cap on the extent of the price rally in place right now. No doubt we discover in the fullness of time whether or not we are correct.