Fundamental Factors Or Fund Money Flow: What's More Bullish For Grains?

March 5, 2014 12:01 AM

What Traders are Talking About:

Overnight highlights: As of 6:00 a.m. CT, corn futures are trading fractionally to 3 cents lower, soybeans are narrowly mixed and wheat futures are fractionally to 1 cent lower in most contracts. Cattle futures are mixed in quiet electronic trade, while hog futures are sharply higher through the August contract.


* Ukraine, Brazil, China and funds... Grain traders' focus is being split as they closely monitor geo-political issues in Ukraine, late-season weather and logistical problems in Brazil and their impacts on Chinese soybean demand, while also watching fund money flow. All of these factors have contributed to recent price strength in the grain and soy complex, but there isn't one factor that has been "the" source of support. Because there are multiple sources and because corn, beans and wheat are all participating in the rally, there's a greater likelihood price strength could persist short-term. But I'm still in the camp that price strength is more temporary than long-term and therefore, must be viewed as a selling opportunity.

The long and short of it: While I believe price strength is shorter-term in nature, corn, soybean and wheat futures have given no signals the rallies are running out of steam. When that happens, it will be time to increase grain and soy sales. Speculative money flow could very well be the key.

* China may approve Viptera corn in first half of this year... It's "possible" China could approve Syngenta's Agrisure Viptera corn (MIR 162) sometime in the first half of this year, Vice Agriculture Minister Niu Dun told Reuters. The unapproved trait has caused the country to reject 887,000 MT of U.S. corn shipments since November. He says the approval process is ongoing and could go through "quickly," though the timing of approval is up to the ag ministry's biosafety committee.

The long and short of it: I'm not certain if the "quickly" comment refers to a timeline or the speediness once a decision has been made to approve MIR 162. Based on how long the process has taken thus far, I tend to lean toward the latter.

* China to remain focused on food security. China plans to increase subsidies for grain and meat production, and expand grain production capacity this year as it strives for greater food security, according to the National Development and Reform Commission. The goal is to expand grain production capacity by 50 MMT this year. The country's economic planner says stockpiling programs for corn, rapeseed and sugar will continue -- stockpiling for cotton and soybeans has been abolished.

The long and short of it: China's population is rising and therefore, there are more mouths to feed. China needs to remain focused on food security. With that said, China will have to rely more on imports as demand is outpacing production growth.


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