How Contagious?

Published on: 15:03PM May 08, 2010
What a week! Early planting reports caused some intraday hoo-ha’s followed by the world’s stock markets taking a bit of a bath over fears of the spread of Greek financial woes. The dollar rose sharply, especially against the Euro, the bond markets soared, coming only part way to earth and econo-babble was all the rage. What do the grain markets think about this?

Beans were sold this week prior to planting reports and along with the stock market sell off. Commercials reduced their shorts and funds remained quite long. Small specs are still carrying the bulk of the short positions. Prices look to have gone down quite enough to generate a bounce this week. To the extent that selling on Thursday was related to the financial markets, I would expect to see that reversed early in the week.

Corn was sold in response to Tuesday’s planting reports but bounced back nicely. It also pretty much ignored Greek Contagion. Commercials reduced their long positions this week, and the large funds increased theirs. The entire short position is being carried by small specs, which sets the stage for a nice rally if and when the crop gives us a scare.

Wheat had a good week, despite everything. Technically, we are now set up for a run at 580 or so basis July. I don’t expect it to be quick or easy, but a weekly close above 520 should bring 580+ before July goes off the board.

So how contagious is the Greek contagion? Portugal and Spain are expected to have financial problems, made worse by those in Greece. Unless Germany has a change of heart, deciding not to contribute the money promised the European Union for assistance to Greece, we have seen the worst. Even if things get a bit worse than they are now, the grain markets can be expected to shrug off European woes. But if the fertilizer hits the fan in China, that will be a different story altogether, and our grain prices will likely drop considerably. Fortunately, the Chinese bubble is likely to survive this year’s harvest.