AG TIME - It may pay to be contrarian by John Walsh
May 10, 2018
The USDA released their report. The screams of bullishness. It is important to separate the beans from corn here, because I feel much differently about them. The USDA added to the global carry, now 92 mmt. Huge. The new crop is reduced to 87 mmt. I have some issues with this and really am questioning the reasoning behind this. The old crop unshipped to China is large. There may well be more old crop carry than advertised. The new crop production already assumes certain facts in flux. In addition, the govt is estimating China imports 103 mmt of beans, much larger than this year. This while their internal numbers are backing down on import estimates. In addition, the hog sector is consolidating and halting expansion. Some of this just seems like a hope and a prayer. The reality of the market may be much much different than today's numbers. The one thing we know for sure is we have a plentiful supply of old crop, and that will potentially grow. It is my belief the bean market will break at some point and rallies present opportunity.
The Corn numbers, I guess, were too good to be believed. The tightest new crop estimates in years and we close lower. The corn story is intact. The corn can move to a higher level. However, with the fund length it may take a bit of an outside spark. The domestic stocks, as well as the global, have friendly stocks to usage ratios. This won't change for some time. Look for any weather disruptions to push us to the next level higher. The Corn should continue to gain on beans, in my opinion.
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John J. Walsh, President, Walsh Trading, Inc.
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