Trade is mixed this morning with corn posting slight advances, and soybeans and wheat under pressure. The majority of what we are seeing is fund balancing and positioning. There are renewed concerns over global trade conflicts as the White House has stated that even if a deal is reached between the US and China, tariffs will likely remain in place. This gives China little reason to give in to US demands. News that China and Brazil are in talks to expand trade between those two is adding to the likelihood of China continuing to bypass the US in the global market. Flooding in the Midwest remains a factor in the market, not just for this year’s production, but for possible quality loss in flooded terminals as well.
Corn futures are benefitting from little other than short covering. Funds have built a record short corn position at a time of year when we tend to see the addition of risk premium in the market, which is starting to give the complex support. We are starting to see less belief in estimates for elevated acres this year, which is generating new crop balance sheets worries. While the US is in no position to deplete corn stocks, it could easily draw them down to a level where rationing would be needed.
Soybeans tried to work higher this morning, but simply cannot find enough buying interest to sustain a recovery. The elevated trade tensions between the US and China are the leading cause of this action. The fact that Brazil’s soybeans are being offered at a 15 cent discount to the US is adding to market negativity. Losses in soybeans are being limited by the fact that they are also heavily oversold given the stage of the marketing year we are in.
Wheat futures are the loss-leader today as funds continue to add to their short position in that complex. This is a result of little other than supply and demand on a global scale. We are seeing steady wheat demand, but nothing that would warrant any additional buying interest. Wheat traders are disappointed in the trade negotiations between the US and Brazil, as the Brazilian offer to import 750,000 mt of wheat is not just from the US as thought, but from the global market.
This commentary is the sole opinion of Karl Setzer. This is intended for informational purposes only and not to be used for specific trading recommendations. The information used to generate this commentary is gathered from a variety of sources believed to be accurate. If you have any questions or would like additional market information, feel free to contact Karl Setzer at 800.858.3738, extension 411, or at email@example.com . You can also follow Karl on twitter; @ksetzergrains