CORN traders are focusing in on the extended U.S. weather forecast. With the USDA estimating +3.3 billion in ending stocks and suspect demand, bears say it will take a significant and wide-spread weather worry to dramatically rally price. Bulls believe the USDA is going to reduce planted acres so the balance sheet is going to shrink in less than two-weeks time. Bulls also see improving ethanol demand and perhaps more interest in U.S. corn from the Chinese. At the same time, the funds are holding a near-record short position, and there might not be that much meat left on the bone for them to take the additional risk if the U.S. weather becomes a concern. As a producer, I continue to protect the downside from any additional risk. I worry if the weather cooperates and China doesn’t step up in a big manner prices could drift sideways to lower into harvest. I would love to be a longer-term bull but just can’t put money to work at the moment, simply too much supply and not enough growth in demand. A major weather worry could help trim supply and ethanol exports could help impprove demand. I will be closely monitoring…
SOYBEAN bulls point to continued Chinese interest in U.S. supply. Bears point to the USDA more than likely pushing U.S. soybean acres higher in the upcoming June Acreage Report in less than two weeks. There’s really no major weather story for the bulls to feed on so the bears can talk about increasing supply as acres increase and trend-line yield remains around 50 bushels per acre. As for Chinese demand, many inside the trade worry that political tensions between the U.S. and China are not improving. In fact, I’ve seen reports that the U.S. recently sent three aircraft carriers to waters near China. Some political insiders say we are simply flexing our muscles and others say its nothing. Interestingly, others say there are some heated confrontations now brewing between China and India, specifically in the Galwan River valley area where both countries have deployed troops in recent weeks. Let’s also not forget, the U.S. administration has dramatically ramped up relations with India, including growing its trade relations and shifting its military policy. I worry if tensions between India and China heat up further the U.S. might be forced to take a side or make a comment that Chinese leaders won’t appreciate. As a producer, I’m keeping all hedges in place and playing from a defensive position. As a spec, I have no position and content watching from the sideline for the moment.
WHEAT bulls are searching for fresh weather and demand headlines as most in the trade have already digested weather concerns in parts of Russia, Kazakhstan, and the European Union. The trade is also well aware of the dry weather here at home in many portions of the Plains. Bears are also pointing to the fact Russia decided not to impose quotas on wheat exports through the end of the year. And by then the significantly larger Australian crop should be available for exports. As a spec, I would like to be a bull but I’m worried we could soon retest the lows as harvest pressure here in the US remains a headwind. At the same time, global macro growth remains highly uncertain and overall demand for U.S supply still not nearly as strong as I would have liked to see.
