- Early weakness in Chicago markets uncovered fresh fund demand with corn, soybean and wheat futures all rising into midday, and this would be the fourth day of active fund demand. Traders have suggested that fund purchasing in the ag space is expected to ease as the week advances. Funds placed ags on their inflationary purchase list, which is evident in the open interest totals from Friday. Remember that funds are still coming out of their net short wheat positions, while adding to their summer row crop longs. Strong morning volume in corn, wheat and soybeans indicates that funds are still buying, it’s just that the cash selling has increased in the rally to help as a buffer to limit the price rally. We would suggest that fund buyers have just entered these positions during the past week, and they are not expected to change their mind or exit these purchases until it is clear that another favorable N Hemisphere growing season is evident. As such, there will be corrections, but it is difficult to envision a lasting bear trend unless President Trump makes trade an issue.
- S American sources indicate that cash soybean movement is slightly better to start the week as the harvest moves southward. However, the volumes of sales are not large as most hope for some weakening of the Brazilian Real and the Argentine Peso. We would maintain that it will take a push to higher price offers to get the Brazilian farmer to sell larger tonnages.
- Fund managers have decided from a risk vs. reward perspective that that the grains are attractive. The funds are already long some reasonable volume of soybeans, which are showing a profit. Chinese demand is expected to slow into late week as their crush margins retreat. The close will be important today to gauge if the funds are willing to pile into additional length. Our bet is that the entire Chicago complex is getting pricey and that a correction looms. However, we doubt that the funds will want to give up on their recent net long position until corn seeds are planted in the Midwest. We would look for this week’s peak to be scored by Tuesday with prices retreating into Friday.§