Funds Big Sellers of Soybeans/Corn on Thursday’s Disappointing Response to USDA Report

May 11, 12:12 pm | Test | Share this:

** The disappointing reaction to USDA’s Crop report amid ongoing US Trade tensions has pressured CBOT corn, soybeans and wheat at midday. Mexico’s comment that it won’t be rushed into a bad NAFTA deal has pressured US grains. And China’s trade delegation that will be heading to Washington next week is not expected to reach any conclusion. The best that is hoped for from the China is that enough progress is scored on several trade issues that kicks the timing of US trade tariffs against China down the road. Funds mangers are liquidating CBOT length amid uncertain US/China and US/NAFTA negotiations. ARC looks for a lower close, but there could be a CBOT bounce going home.

 ** CBOT brokers estimate that funds have sold 14,700 contracts of corn, 10,400 contracts of soybeans, and 3,700 contracts of Chi wheat. In soy products, funds have sold 6,800 contracts of soymeal while being flat in soyoil.

 ** For weeks, ARC has been advising clients that trading politics is difficult. The uncertainty over what back room negotiations brings is impossible to forecast and has thrown bearish blanket on CBOT rallies.

** ARC notes that next week’s US/China negotiations in Washington is expected to produce a softening of trade positions. This could be market supportive if the US is willing to hold back on its $50 Bil tariff threat to keep talking. 

 ** Thursday’s CBOT price performance was disappointing in that open interest rose in corn, soybeans and wheat, which likely trapped new longs into losing positions. Yesterday’s post USDA report buyers are today’s sellers as key chart support is breached.  CBOT weekly charts will look bearish with a July corn close under $3.99, July Chi wheat under $5.00 or July soybeans below $10.00.

 ** Besides US/China and US/NAFTA trade tensions, there are other concerns for CBOT wheat and corn. New crop fob Russian wheat is priced at some $.80 below the US Gulf for comparable 12.5% HRW wheat. World buyers will take Russian fob wheat – not the US – amid such a wide spread.

 And March CBOT corn futures was pegged at $4.30/Bu yesterday – not a cheap price in recent years. It’s tough to be overly bullish of $4.30 March corn futures for early 2019 without a Midwest weather problem/yield issue.  

 ** ARC estimates that US corn planting through Sunday will reach 60-63%, just behind last year’s 65% pace. Spring planting progress is lagging across the Lake States of MN, WI and MI. US soybean seed it’s expected to reach 23-35% done, which is close to last year. Amid the warm/wet weather, the US corn crop is expected to be rated above last year sometime in early June.

** Midday GFS North American Weather Pattern Discussion: The forecast is similar to the overnight run as the model lays down heavy rain across the fat areas of the Central US as frequent storm systems run across a dividing line of humid air to the south and lingering cold across the north. The forecast argues that there is a chance of rain in almost any portion of the Plains, Midwest and Delta for the next 14 days. Some regions may endure too much rain, but temps look warmer for the last half of next week. The GFS blankets much of the Central Plains with rain helping to diminish its drought, while the Dakota’s enough a drier spate of weather to seed crops. A deep Trough of low pressure is noted in the SW US that ejects storm systems eastward with regularity. This is an active and wet period for the Midwest, which assuming that crops are planted, bodes favorably for yield/production.   

1-15 day South American

** AgResource Midday Comment: Funds came out the box as sellers as they liquidate a portion of their length. ARC would not be surprised by some sort of rally next week as China and US negotiators return to the bargaining table. This is no place to turn bearish with an entire Norther Hemisphere growing season ahead. Wait for rallies to sell old/new crop. Our market view is shifting to sell rallies.