MF Global bankruptcy knocks the market off balance to start the week. Conficting fundamentals never let grains regain momentum.
Einstein’s theory of relativity seemed to be in play this week as the grain markets traded flat for much of the week. Driven mostly by the currency indexes, traders were unwilling to take any positions as the markets opened Monday to the shocking news that MF Global filed for bankruptcy.
"We have this knee jerk action and reaction by the U.S. dollar and the European markets with wild fluctuations from one day to the next, then you add in the MF Global announcement, and people were just unwilling to trade. I think people just stood to the side and waited to ride this thing out," says Jerry Gulke, president of the Gulke Group.
Good fundamental news was relatively lacking for the week. The bright spot was corn, but that was only "so-so," Guke says. For the second week in a row, soybean numbers were extremely low.
"The soybean thing was really interesting. This is the time of year that China books supplies way ahead. I looked at it from a year to year basis and we’re about 35 million bu. of beans less than last year. That turns out to be the exact number of beans that we have left in the world, based on the September 30 Grain Stocks report," he says.
Gulke says it’s possible that the market has caught up with those numbers, however. He speculates that could be the reason soybean markets didn’t crash late in the week after the export numbers were released.
"That may be why we didn’t get real hammered on soybeans for the second week in a row. We have to keep it watching it because there are some people getting real negative on soybeans due to the real good start on the crop in South America."
Focus now, particularly in the corn market, turns to next Wednesday’s USDA Crop Production and WASDE Report. And like many reports, it matters more how the market closes after the report, rather than what the report itself says.
"It’s probably a non-event , except for what they do with the export numbers. I think they’ve cut feed usage enough, but the only thing is if they cut production numbers, they may say there is reason to believe we will still sell less than we thought. I’m thinking there may be much ado about nothing. But when you think that, you usually get surprised."
Gulke says he will most likely be watching for a negative report and if that comes to fruition, and the market holds steady, that will tell him that the market has already taken a bearish report into account.