- Chicago markets have been mostly lower today with soybeans and wheat posting new lows on further fund selling. Macros were pressured with a lower US$ and US equities posting sharp early losses although shares and crude oil have clawed back much of their early losses.
- Chicago futures have, as we all know, declined sharply in recent weeks, and it must be somewhat nerve racking holding a net short position going into the upcoming, and unpredictable, USDA report in advance of a fresh N Hemisphere growing season where acreage and weather is still not fully known. Some have suggested that the odds of a weather issue somewhere that will upset a short grain/oilseed market are high and as a consequence now is not the time to be heavily short. We disagree with the “odds” argument but continue to caution an overly bearish stance based upon historic pricing, a heavily oversold market and the fact that there has been no significant sharp move lower so far.
- E Australian farmers have enjoyed abundant rains in Queensland and New South Wales in recent weeks. S Australia is still missing the moisture and the time is right for rains to start to drop if trend yields are to be seen. Aussie farmers are not selling old crop wheat, and are waiting for higher prices. Just like Russia farmers, producers are not anxious to sell stored wheat with the Australian dollar rising and interior prices seen as cheap. New crop seeding will start in several weeks and once farmers are focused on seeding the next crop, they won’t be interested in selling the old crop.
- Today’s label is “Macro Monday”, the US stock market is attempting to rally following eight days of decline. US grain and soybean export demand remains buoyant and we would question how wedded to their positions the fund managers truly are in advance of the USDA report scheduled for release on Friday. Chinese crush margins are showing signs of recovery and there could be fresh buying interest on the horizon as a result. Our guess would be that we could see some short covering and Chinese buying, both of which could see some price recovery although our longer term view remains that rallies will be limited.