- Chicago futures take a breather following their post February Crop Report rally. Funds have piled into a sizeable new net long positons in corn, soybeans, soymeal in the past five trading days. In wheat, funds have covered a large share of their net short position. Surging corn and soybean open interest has reflected this “fund buying spree” which should be reflected in Friday’s CFTC Commitment of Traders report.
- US farmers should be sending fund managers “Valentine’s Cards” as they run up prices for new cash sales and boost revenue insurance program average prices. The US farmer is enjoying the Chicago gains as they are able to profit in two forms. In fact, US farmers are pleased that December corn is again taking aim on $4.00/bu, even with US corn stocks far larger than last year and S American crop prospects looking much improved.
- China returned from its long Lunar New Year break with strong demand for S American soybeans, after a January buying hiatus, that resulted from their fear that newly installed President Trump could take a swipe on Chinese trade. This trade swipe never occurred and Chinese crushers were left short bought. Chinese crushers were active in covering their March/April needs and had several weeks of demand to fill. With Chinese crush margins retreating back near breakeven, their buying pattern going forward will be much more normal.
- Chicago markets act tired with fund demand slowing and the US cash market plugged with supply. Spreads are starting to roll over with active May-March corn spreading. The Mexican Parliament has introduced a bill to source their corn from S America, instead of the US. This bill could be voted on later this week in response to Trump calling for a renegotiation of NAFTA. Amid Brazilian soybean yields improving and China’s worry over avian influenza expanding, the market feels like we are close to a seasonal high. This is no place to be bullish.