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Da Bulls and Da Bears: May 2, 2016

 

 

Bulls

  • South American weather
  • Fund length
  • Soybean crush

South American weather has not improved much over the last few days. Still too wet in parts of Argentina where they are trying to harvest soybeans, and still too dry in Brazil for the corn crop there. I also saw a blurb earlier today about Argentine beans being harvested with 20-40% damage. 

Funds added to their length last week, and now are long both beans and corn. As mentioned previously, they will need to continue to defend these positions, and lend support to the markets.

Soy crush was just a bit higher during March than most anticipated.  Soybean meal has seen good demand, and has really rallied over the past few weeks. Since April 8th, July meal futures are about $78/ton higher, while Bean Oil has actually lost a cent and a half per pound (or $30/ton).  This is why beans have rallied more than a dollar over the same time period. 

 

 

 

Bears

  • Planting progress
  • Over bought?
  • Large wheat crop

Despite what you see outside of your back door, planting in the U.S. continues to progress.  As of Monday, May 2nd, the USDA reported 45% of the corn acres planted. This compares to a 5 year average of 30%.  Beans are at 8%, compared to 6% on average for the past 5 years. 

I haven’t heard it yet, but would expect that in the next week or so, we’ll start to see stories about the funds being “over bought”, as the pendulum usually swings.  It wasn’t that long ago that people were concerned about the record shorts in the market, so stay tuned for the opposite story soon. Keep in mind that the daily soybean price limit changed from 60 cents/bushel/day to 65 cents as of May 2nd.

The U.S. wheat crop continues to grow. At least in relation to expectations. The annual Kansas wheat tour began today, Monday, May 2nd, and initial information is reporting a very good wheat crop. Not only in quantity, but quality. Sure, I may be grasping at straws for “bearish” inputs, but this is one to keep an eye on. 

As always, we encourage you to leave firm offers for Old Crop and New Crop, especially prior to getting back into the fields. 

 -Tom Guinan, Grain Origination Manager 

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