• Morning trade in Chicago sees prices lower (not unexpected) after recent hikes, largely on the back of slowing fund demand. Overnight trade was active with prices steady, rallying in Asia then declining as Europe woke up and hedge fund profit taking. Volumes have, once again, been strong and soybean open interest has hit another record large, and reflects (we believe) the speculator has backed the recent price rally. Has the onslaught of buying now finished? This can never be answered with 100% confidence until some significant time has passed and we can look back and analyse the history, however, looking at the chart pattern we favour an “exhaustion” type peak as volumes were huge and it feels as if fund buying in soybeans and products could well be done for now. There is a possibility that there may be more to do in the grains, corn and wheat.

May ’16 Chicago Soybeans – prices (left hand) cents/bu

• Consider the following scenario from an investor perspective – global economic indicators have been, and are, uninspiring, equity markets have been equally unexciting and soybean prices (among other agri commodities) are at multi-year lows. It would not be unexpected to see money flows into the commodity sphere as a consequence, and this is exactly how we view the recent rally. Given the scenario our next question would be, “If the speculative money is now committed, who or where is the next buyer?” Before we consider an answer, we would suggest that consumer cover, generally speaking, is at pretty good levels because of the historic low pricing we have seen for some while. As prices have risen in recent weeks the end user has backed off because of these good cover levels and consequently we do not see a rush to follow prices higher. If this does become the case and there is a lack of buyers the likely price move will be lower to attract buyers once again. Added to all of this, we should not lose sight of the supply situation that we have mentioned so frequently in recent months. Watch this space, this rally has been about money flows – not fundamentals!

• Away from our fanciful thoughts and ramblings – the recent price rally may well have US farmers contemplating an expansion of soybean acres as for the first time in many months they see a crop that can generate them a profit. Again it will be up to the weather in the next five or six weeks that determines the actual soybean acreage, and corn too for that matter.

• The USDA has today released its weekly export figures as detailed below:

Wheat: 336,200 mt, which is within estimates of 100,000-700,000 mt.
Corn: 1,247,100 mt, which is within estimates of 950,000-1,300,000 mt.
Soybeans: 466,500 mt, which is within estimates of 125,000-500,000 mt.
Soybean Meal: 196.800 mt, which is within estimates of zero-230,000 mt.
Soybean Oil: 2,100 mt, which is within estimates of zero-20,000 mt.

• Brussels has issued weekly wheat export certificates totalling 1,184,650 mt, which brings the season total to 25,257,707 mt. This is 1.923 million mt (6.95%) behind last year. Interestingly the USDA’s latest update reduced their estimate of the season total EU exports by 500,000 mt to 32 million mt. Given the pace of the last ten weeks exports it now looks feasible for this figure to be achieved.