Futures are on both sides of unchanged to start the week as we see position squaring start to take place ahead of Friday’s USDA reports. The most interest going into this is on acreage, mainly if we will see a confirmation of the expected shift from soybeans to corn. What is more likely is we will see numbers closer to the Outlook Forum projections from February. The lack of a fresh story to drive traders is adding to the lethargic market to start the week. The flooding in the Midwest remains an issue and topic in the market, but this is no longer fresh news. So far, losses in Iowa and Nebraska total $3 billion and will grow from there. Funds remain heavily short in commodities which is limiting selling interest, while improved global production figures is capping gains.
Corn futures keep bouncing on both sides of unchanged today with little fresh interest being shown in the complex. Funds are holding a record short position which is preventing losses, as is strength in the cash market. This demand may be short lived though as 13% of US ethanol plants remain idled due to the Midwest flooding. Black Sea corn is trading at a discount to the US which is muting the export market. Trade is unimpressed with the Chinese purchase from last week, as the booking was more of a goodwill gesture than out of need. Interesting to see there were no GMO restrictions on the corn booking, which many analysts are taking as a sign it will be canceled in the future.
Soybeans have tried to rally this morning but simply cannot find buying interest. China is showing little interest in booking US offerings which is a dark cloud in the complex. This combines with the cancellation for new crop bookings in last week’s export report to show global demand for US offerings is minimal. Add in the likelihood of elevated soybean plantings this year and we could see significant pressure on the soy complex. One good point of this is that eventually US soybeans will become the most affordable in the global market and entice demand.
Wheat values are also on both sides of unchanged this morning. Demand remains the greatest limiting factor on wheat, as year to date sales are just 66% of total expectations. This is an all-time low volume. Reports that the Ukraine crop is in near perfect shape also weighing on wheat futures. The fact that US wheat is already competitive in the world market is limiting downside potential.
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