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Will Fund Buying Show Up Today?

Published on: 10:47AM Apr 26, 2016

Good Morning! Paul Georgy with the early morning commentary for April 26, 2016.

Grain markets are near unchanged after an active overnight session. Macro markets are waiting for the results of the FOMC meeting which starts today.

In order to assess the direction of a market, one has to try and figure out what is causing the volatility. Therefore when looking at the fundamental picture not a lot of news items changed from the previous trading day. However, traders point to a single entity buying large volumes across the grain and soybean complex on Monday. Money flow for those short the market became an issue after recent increases in margin requirements. Market participants had to meet margin calls or exit positions.

Outside money flow has moved into the commodity markets in recent weeks, as noted below. The question for today is, will large players be buying today? Talk to your Allendale Broker about strategies to help keep you in the markets during these volatile times.

The South American weather forecast gives Brazil crops a chance for a drink of water this week while Argentina is expected to dry out a bit. US farmers planting pace will slow down this week as rain is forecast for the balance of the week.

Are We in For a Big Acreage Shift? Join us in our next webinar, this evening at 8:00 PM CDT.  Register. Allendale's Rich Nelson will share the latest thoughts on US corn and soybean acreage, including how recent price swings could impact the final planting numbers, and how the market could react to acreage changes. We'll also speak to AgriGold Agronomy Manager, Mike Kavanaugh about the potential of the 2016 corn crop, and his thoughts on acreage expectations.

USDA says approximately 30.4 million acres of corn have been planted so far this year which is 30% of the total crop. US farmers doubled the 5 year average planting pace for last week.

Soybean planting progress is 3% of total versus 2% average while spring wheat continues to go in the ground early. USDA has 42% of the spring wheat crop planted compared to an average of 28%.

Winter wheat conditions improved by 2% to 59% good/excellent versus trade expectations of 58%. Last year, the winter wheat crop was estimated at 42% good/excellent.

Barclays reported commodity investments in the first quarter increased by $24.2 billion with price appreciation brought total commodities investments assets under management to $193 billion.

Funds were estimated to have been net buyers of 16,000 corn contracts, 15,000 soybeans, 4,000 wheat and 6,000 soymeal contracts. They were estimated net sellers of 3,000 soyoil contracts.

Traders give zero chance of a rate hike at the 2-day FOMC meeting that begins today. April consumer confidence is expected to edge lower on today’s report.

The cattle futures are oversold and projecting a decline in cash cattle not seen in the last 15 years. The average decline in cash cattle prices from spring highs to summer lows is 11.5%. Current August prices adjusting for a normal basis suggests a 19% drop in cash is already priced in to the market. Look for choppy markets to continue.

June lean hog futures chart is in a downtrend and has been for almost two months. The downtrend line shows resistance at 80.12 today. Support crosses at 76.80.

Dressed beef values were lower with choice down .10 and select down .46. The CME Feeder Index is 147.89. Pork cutout values are up .82.

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