Da Bulls and Da Bears: April 4, 2016
- Soy complex
- China to end corn reserves
- Usage still good
After a fairly steep drop from the first part of October until the first part of March, the soy complex has found some solid footing and has been climbing fairly steadily the past 30 days. Part of this has been attributed to the funds moving from a net short position to a net long position. There is also an issue with the Palm crop in Southeast Asia that is affecting the supply of palm oil, and pushing up the value of competing oils, like soy oil.
News from China indicates that that they will be curtailing their previous policies of stockpiling of corn. This move is expected to reduce the amount of acres being planted to corn, and gradually whittle down their reserves of corn.
The last piece of good news I can find has to do with demand. Whether it is from the industrial sector, or exports, demand is still fairly solid. We continue to hear of little bits of news here and there to support this statement. Foreign countries tender for corn, wheat, soy; ethanol usage is steady with positive margins (for the most part); good soy processing demand.
- USDA acreage report
- Planting progress
- Global grain supplies
- Crude oil woes
The main market mover, especially for corn, was last week’s USDA report. 93.6 million acres for corn planting, was way above trader’s expectations. Many continue to argue that it is simply too high, and due to the fact that the data was gathered the first week of March, it is also out of date. Regardless, this is THE number we have to work with for the time being. While an argument can, and will, be made about the potential to switch some acres to soybeans in the southern part of the U.S. due to planting delays, it will take some time before that comes to fruition.
Planting progress reports will start this week. I expect that once areas are ready to plant, it will not take much to see the progress jump quickly. With so many people investing in bigger/better equipment the past several years, planting delays don’t have as much of an impact on grain prices that they once did.
Global grain supplies continue to be more than adequate, currently. If we have another year of relatively decent weather throughout the world, these supplies will not be depleted any time soon. As you recall, we had quite a bit of areas under water and/or prevented from planting last spring in the U.S., and that did not do much to slow the drop in grain prices. Partly because it eventually became a relatively small area, but mostly because the other parts of the U.S. had larger crops due to the same issue, plenty of rain.
Crude Oil continues to struggle. May crude did rally to about $42.50 per barrel, but has since slumped again, and is now trading a few dollars below the critical $40 level. There are some stories about the potential leaders in crude oil producing countries to come to some agreement about production levels, but I am more in the camp of “I’ll believe it when I see it”. There are just too many egos at play here and various reasons for them to not agree (on anything). As long as oil stays at or below $40, we will not see much of a rally in corn.
-Tom Guinan, Grain Origination Manager