- Fund managers have quickly shed their length in corn and soybean (and product) futures in the past five weeks and when added together, funds have sold close to 500,000 contracts of Chicago corn, wheat and soybeans. It should be noted that such sharp falls in net long Chicago positions are not unusual, but they usually occur in mid-growing season or during harvest. To have funds moving to large net short positions in the grains at the beginning of the N Hemisphere growing season is unusual. At some point between now and mid July we would suspect that funds will be chased out of shorts potentially triggering a Chicago recovery, which we would currently view as an opportunity to sell once again!
- Chicago futures are mostly lower today, wheat is currently just in positive territory, as post-USDA report short covering appears to be complete. It could be assumed that markets have stabilised and any meaningful downside risk will depend upon N Hemisphere growing conditions between now and August.
- It has been reported that bird flu in China has affected six additional humans, with one new death, bringing the total to 162 since October. Dalian futures open on Wednesday, and meal and corn price action will be watched closely.
- Favourable early season crop conditions are needed to trigger the next leg down in prices, and confirmation of lasting adverse weather is needed to go up, meanwhile until either materialises the trading range into late spring lies somewhere in the middle. We continue to urge caution against turning bearish here, but the trade is well aware that Jun-Jul weather almost always takes precedence over planting dates. The perception of yield loss will occur at some point, and as stated earlier our view is that any such a rally would create a selling opportunity rather that a rally to chase higher.