Trade has started the session mixed with grains under pressure and soybeans on the positive side. Much of what we are seeing is simple position squaring ahead of tomorrow’s acreage and stocks reports. There is a little more fundamental news for the market to work with this morning, but much of this is being overlooked. One of the big stories this morning is reports that up to 41% of China’s hogs may have been culled from ASF. If correct, this will greatly impact China’s commodity demand on a whole. On the positive side, this has economists expecting to see record Chinese pork imports from the US, and should benefit that industry. Trade is still keeping an eye on the floods in the Midwest and what the impact will be on acreage. Cooler temperatures have prevented rapid snow melt which is good, but are also preventing soils from warming ahead of spring fieldwork.
Corn futures are under mild pressure today as the US is starting to face more competition in the global market. This comes when the corn export program is already struggling to maintain a share of global trade. Ukraine officials claim their grain production will be up 7 million metric tons from last year, and the Brazilian Safrinha crop is expected to be a huge 23% larger than last year. Many buyers are already lining up for the newly harvested Argentine corn as well. In spite of this, US export basis remains strong as terminals are unable to get timely shipments out of the flood-stricken Midwest. Funds are holding a record short position going into tomorrow’s reports though, which could easily set the market up for a rally, even with neutral data.
Soybeans are trying to post advances today, but struggling to entice any buying interest. Early soybean harvest reports out of Argentina are 20% above trend which is tempering any attempt at a rally. Export demand is minimal right now, which is also keeping a lid on soybeans this morning. Some of this is being countered with ongoing crush demand and slow country movement. All attention in the soy complex is on China and the spreading ASF. We are now hearing of heavy losses in Vietnam as well. As with corn, the large short position funds are holding is preventing heavy selling ahead of the USDA reports.
Wheat is suffering the greatest losses today as a classic case of “buy the rumor, sell the fact” takes place following overnight export sales. Egypt was in and booked several cargos of US wheat, and others are tendering for feed wheat. Farmers are also holding wheat as they are uncertain of this spring’s acres and planting potential. Wheat is also oversold, which is preventing losses from being extended.
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 firstname.lastname@example.org . You can also follow Karl on twitter; @ksetzergrains