Grain and soy markets began this weeks’ trade with a little follow-through pressure, but at least in the corn and bean markets, we have returned to the positive column while wheat continues to struggle. One has to suspect that the buying is little more than a corrective bounce after several days in a row of lower closes and with the news at hand, it may be a challenge to keep these markets above water.
Over the weekend AgRural provided updates on the planting pace in Brazil, and as of Friday, they estimate nationwide 34% of the beans have been planted. This was up 14% for the week and compares with last year at this date at 20% and the five-year average of 18%. The top producing state, Mato Grasso has reportedly planted 62%, versus an average of 26% but progress in the number two state Parana has been slowed by rains, and it is estimated they are 48% complete. This compares with 53% last year and 44% on average. Be that as it may, it would appear this nation is well on its way to planting record acreage as they position themselves to take advantage of the U.S./Chinese trade war.
As I have commented many times, the impact of a trade war can be felt for many years as not only new trading alliances are formed, but investments are made. It was reported over the weekend that the Chinese state-owned grain/food company Cofco, has begun construction on a new 60,000 MT (2.2 million bushel) grain facility in northern Mato Grasso. The location of this facility will help facilitate movement of soybeans up to the Atlantic shipping post at Barcarena. If you recall as well, last year Cofco completed the purchase of both Noble Agri and Nidera, which has given them greater access to the South American grain trade. These acquisitions provided them with around 2.7 MMT (99.2 million bushels) of capacity among facilities spread across Brazil, Argentina, and other South American nations.
In mainland China, that country continues to try and do its utmost to reduce imports of soy protein and announced this morning that a ban on rapeseed meal from India, which has been in effect for seven years, will be lifted. While quality will likely be scrutinized as that was the initial issue, supposedly India could export as much as 500,000 MT to them. Of course, if China does not get the African Swine Flu issue under control, they may need a lot less protein. Over the weekend there were new reported cases in the southern regions of the country where much of the pork industry is concentrated.
Obviously, funds took advantage of the slide in corn last week to reduce their short and in fact, managed money is now long 20,000 contracts, compared with short 34,000 the week before. They remain short beans with around 36,000 contracts, but even this was reduced 5,000 and still hold around 17,000 contracts short in the wheat market.
Macros are defensive this morning, energies and metals are weak, and the dollar is strong. Equities are lower but nothing that appears panicky at this time. I did see an interesting comment this morning as this Wednesday will be an anniversary date. It will be 89 years (Fibonacci) from the stock market crash in 1929.