In today’s Breakfast Brief, we talk about the weather and the market’s reaction to the most recent WASDE.
“The mind is like an iceberg, it floats with one-seventh of its bulk above water.”
– Sigmund Freud (Austrian physiologist)
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Grains this morning are mostly weather as the market continues to digest last week’s game-changing WASDE report, changes in the overall commodity complex (Goldman Sachs is now bullish on oil!
) & ongoing weather fluctuations in North America.
A lot of discussion continues to be had around the soybeans market as last week’s WASDE report still has people scratching their heads. There’s obviously bullish thoughts out there, given the price increase in the market the last 2 months, but something to keep in mind is that USDA’s demand pump-up for beans was based on a price range of $8.35 to $9.35 (or an average of $9.10). With markets almost a dollar & a half higher than that, one could argue that some of this demand will be lost and that the highs are in
Corn On An Upward Trend
The flipside of this argument is that the main US competitor right now seems to be Brazil and their competitive position seems to be waning. With less corn production because of drier conditions affected the 2nd
/ safrinha crop, plus the Brazilian Real appreciating because of President Dilma Rousseff’s impeachment, international buyers may look to America to fill its needs
In Chicago, corn has been able to join soybeans in the upward trend and if we see the December contract touch $4
, one could start to assume that we are seeing some of that international demand shift back to the northern half of the equator (especially given the US export sales lately which have been unusually strong for this time of year). Add in the aforementioned 1 or 2 million acres (or more?) of corn being lost to soybeans, it’s very likely you see the US corn carryout number drop below 2 Billion bushels again.
Icebergs On The Horizon
Given the rumbling of money flows and the rise to glory on the futures markets over the past number of weeks, it’s hard not considering locking up something on new crop sales. Hedge funds are now holding more than 200,000 long soybean positions
, while the net-long corn position continues to sit around 43,000 lots (Chicago wheat is net short at more than 78,000 contracts). From a basis standpoint, the question we’re asking is what has more downside risk – futures or basis? With futures values increasing lately, we’ve seen basis levels widen a bit and so, should futures pull back a bit, you’d likely see basis improve (for our Canadian readers, we’re assuming currency effects are mute for now). Ultimately, we continue to watch weather reports, but more than anything, we should expect some acreage changes in the June WASDE report. More simply, there are icebergs on the horizon that the current bullish armada is sailing into and while we can’t ignore replanting numbers, this soybean market is feeling very top heavy.
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At 6:00 AM CDT in the North American futures markets:
(all prices in dollars per bushel unless otherwise indicated)
$1 USD = $1.2906 CAD, $1 CAD = $0.7749 USD)
July Corn: -2.8¢ (-0.7%) to $3.88 USD or $5.008 CAD
July Soybeans: -1.3¢ (-0.1%) to $10.638 USD or $13.729 CAD
July Soybean Meal (per short ton): -$1.80 (-0.5%) to $361.20 USD or $466.17 CAD
July Soybean Oil (cents per lbs): +0.10¢ (+0.3%) to 32.60¢ USD or 42.07¢ CAD
July Oats: +1.3¢ (+0.25%) to $1.965 USD or $2.536 CAD
July Wheat (Chicago): -0.3¢ (-0.05%) to $4.745 USD or $6.124 CAD
July Wheat (Kansas City): -1.3¢ (-0.25%) to $4.548 USD or $5.869 CAD
July Wheat (Minneapolis): -0.8¢ (-0.15%) to $5.348 USD or $6.901 CAD
July Canola: -2.9¢/bu / -$1.30/MT (-0.25%) to $9.042/bu / $398.69/MT USD or $11.669/bu / $514.80/MT CAD
Friday’s Winnipeg ICE Close
July Barley: unchanged at $2.902 USD or $3.745 CAD
July Durum Wheat: unchanged at $6.264 USD or $8.083 CAD
July Milling Wheat: unchanged at $4.977 USD or $6.423 CAD
COMMODITY TRADING INVOLVES RISK AND MAY NOT BE SUITABLE FOR ALL RECIPIENTS OF THIS POST. Neither the information presented, nor any opinions expressed, constitutes a solicitation for the purchase or sale of any commodities. The thoughts expressed in this email and basic data from which they are derived are believed to be reliable, but cannot be guaranteed due to uncertainty about future events and complexities surrounding commodity markets. Those acting on the information are responsible for their own actions.