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Da Bulls and Da Bears: April 21, 2016

 

 

Bulls:

  • Weather woes
  • Short covering in corn
  • Crude oil?

The most recent report from the USDA shows U.S. corn planting at 13 percent, surpassing last year’s progress of 7 percent for the same time frame, and an average of 8 percent for the past five years. Despite the decent start, this week’s rain event is getting some notice, and causing a little bit of concern. The main weather stories are outside of the U.S. Persistent rain in Argentina is delaying harvest there, and persistent dryness in Brazil is hurting their corn crop. Corn planting in the EU was estimated at 4 percent vs.17 percent last year. 

The record corn shortness in managed money funds began to erode this week. We’ll see an update on these positions after the close Friday. There was talk earlier in the week about Brazil ending a tariff on corn imports, and the potential for that to open up the possibility of U.S. corn getting shipped there. Since then, it sounds like it will be limited to the MERCOSUR trading block, but regardless, this news helped reel in some of that corn short. 

Since we started this blog, I have had crude oil on as a factor. But, until this week, it has been in the bear factor list. With crude jumping up above $40 recently, and then staying there, it feels like we’ve found an area that will help support corn prices as well. The failure of oil producing countries to agree on production limits was pretty much shrugged off by the market. 

 

 

Bears:

  • USDA acreage report
  • Global grain supplies
  • New daily limits?

Not much new to add to the bear side this week. We will eventually get back to arguing about which crop was planted on which acres, but for now, the large estimate on corn from the USDA is just going to hang over the market. 

Same with global grain supplies.Until we get further into the growing season, people will be aware of the supplies, and ending stocks estimates, but there are far more important items to focus on in the near term. Once the crop is planted and we get a better handle on production estimates worldwide, the focus will shift back to supplies and if they are deemed more than adequate, we could drop a whole lot quicker than we moved higher. 

Finally, it was announced that the daily limits have been adjusted for soybeans. The initial limit will change to 65 cents per bushel, effective May 2. The expanded limit will be $1.00. Corn limits of 25 cents and 40 cents remain in effect. These will be in effect until the first of November when they could be changed again. Just something to keep in mind.   

-Tom Guinan, Grain Origination Manager 

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