Fund Money Flow A Key 'Fundamental' Factor In Grains

June 4, 2013 01:06 AM

What Traders are Talking About:

Overnight highlights: As of 6:15 a.m. CT, corn futures are trading 4 to 9 cents lower, soybeans are 9 to 17 cents lower and wheat futures are 1 to 8 cents lower with Chicago contracts leading the decline. Based on overnight trade, bears will hold the solid upper hand on the open this morning. Cattle futures are seen opening with a narrowly mixed tone, while hog futures are expected to open steady to slightly firmer.


* Funds 'feel' like the key. Corn futures slumped Monday while soybeans rallied. Much of the market commentary focused on planting and emergence delays as the "reason" for the soybeans strength. But if that was the case, wouldn't corn have also traded higher? After all, planting date is much more important to final yield potential for corn than soybeans. The real reason soybeans were firmer and corn was lower Monday, in my opinion, was fund money flow. Funds sold an estimated 10,000 contracts (50 million bu.) of corn and bought an estimated 7,000 contracts (35 million bu.) of soybeans yesterday. While funds sometimes base their trading decisions on a fundamental reason, that isn't always the case. In yesterday's action, technical happenings likely had a greater impact.

The long and short of it: As the market tries to sort out many uncertainties with acreage, weather and planting delays and their potential impact to yields and final crop size, fund money flow will remain a key "fundamental" factor in the grain and soy complex.

* Corn and soybean progress -- what's left. As of Sunday, USDA says 91% of the corn crop was seeded, indicating there are approximately 8.76 million acres left to seed. Corn emergence stood at 74%, meaning there are still 25.3 million acres left to emerge. Meanwhile, USDA's first corn crop condition ratings put 63% of the crop in the "good" to "excellent" categories, down from 72% on this date last year. For soybeans, 43% (or 33.2 million acres) of the crop is left to plant and 69% (or 53.2 million acres) is yet to emerge.

The long and short of it: Corn and soybean planting and emergence were right in line with pre-report expectations, which is easing traders' concern, despite the delays.

* GMO wheat investigation continues. USDA has expanded its investigation into the GMO wheat situation with 15 investigators now working on the case, up from nine last week. The focus of USDA's investigation remains Oregon, where the unapproved GMO plants were discovered. Several key U.S. wheat trading partners continue to temporarily halt U.S. wheat imports (or at least some U.S. wheat imports) until results of USDA's investigation are known. Meanwhile, Monsanto (the maker of the unapproved GMO wheat strain in this case) has set up a website with information on the situation. Visit that site here.

The long and short of it: While it's unlikely there is any of this GMO wheat in the commercial supply, U.S. trading partners and market participants are awaiting answers in this case. Uncertainty and unanswered questions breed unease.


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