- Chicago markets have seen some fund short covering that has elevated both corn and soybean prices above last week’s highs in volume tat is best described as uninspiring. Wheat has not followed and is trading in negative territory with less than an hour to go. It seems that a high volume of in the money March soybean put options have expired worthless (when they should have realised the holder a profit) and traders are asking why this is? A mistake or oversight, albeit an expensive one, seems the most likely answer at present.
- Fundamentals in the corn, soybean and wheat markets have not change dover the weekend or today, bearish oversupply and flagging demand patterns continue to point bearish, although lower prices seem tough to achieve due to historically low physical prices creating a floor in prices that seems difficult to break through. Holders of bearish positions are just not seeing prices move lower and therefore profits are not accruing, as a consequence many are simply tired of their position and exiting ahead of the upcoming USDA Outlook Forum conference.
- For those looking for relief in the form of a switch from El Niño to La Niña it seems that disappointment is going to be the order of the day! It seems that El Niño will persist into late 2016 as the Southern Oscillation Index (SOI) suggests a second wind to the phenomenon.
- Argentine old crop soybeans have been priced at a $25-30/mt premium to new crop for some while. The premiums have some suggesting that Argentine old crop soybean stocks are lower than projected by USDA. There appears to be no statistical evidence that Argentine soybean stocks are lower and we are not looking for the USDA to make any adjustment in coming WASDE reports. Argentine farmers are holding old crop soybeans due to the forward Peso price curve and knowledge that the Government will cut the soybean export tax by another 5% in December. The forward Peso rate a year from now is 18 compared to today’s rate of 15 peso/US$. This means that farmers can make 25% on holding any cash soybeans. This is why Argentine farmers have been slower sellers of cash soybeans – not that cash stocks are not there!
- Current price direction in Chicago seems (to us) unsustainable for long as there is too mush supply chasing after too little demand.