- It has been a positive return to work following yesterday’s President’s Day holiday, at least as far as prices are concerned. 2% gains in wheat, 1% gains in corn and 1.75% gains in soybeans with nearly as much in soybean meal – a sea of green has been the colour of screens today!
- Key triggers may well have been the reduction by Brazil’s AgRural who have reduced their estimate of the Brazilian soybean crop to 87 million mt, down from their last month’s estimate of 88.8 million mt due to concern over recent dry conditions. For reference the Brazilian AgMin is at 90 million mt and USDA at 89 million mt (up from 88 million mt a month ago).
- Of note is the pace of the Brazilian harvest, which will be 25% done before the week is over and a reported 22 million mt already “in the bin”. It is expected that 40% will be harvested by the end of February and beans being received by both crushers and exporters are reportedly of excellent quality. The current market strength is being stimulated by consumers covering nearby “shorts” having been wrong footed in their (and our) expectation of prices falling earlier than is actually the case.
- The consumer covering has undoubtedly added a “trigger” to the funds who appear to be adding further to their longs. It is also interesting to note that producer selling has been very much in evidence including in S America, including Argentina where producer hoarding has been very much a recent theme due to the difficult (to say the least) fiscal situation.
- The rally is soybeans is attracting sellers, and we would expect that there will be sufficient selling activity to limit upside.
- In a slightly different vein, the recent weather anomalies in the US, cold in the midwest and drought in the southwest, appear to bear the hallmarks of La Niña. Snow cover is present across much of the midwest corn fields up to 18 inches in depth, although temperatures are predicted to ease somewhat this week allowing for some thaw and melting. In contrast, southwest US states into the Great Plains have experienced further drought conditions, which may well threaten hard red winter wheat. Whether or not the La Niña phenomenon will build and develop is something that will be watched with interest in coming weeks.
- The question we ask tonight is, “will Wednesday show us a turnaround Tuesday?”