Losing the investment community

Published on: 14:43PM Sep 15, 2014
Wheat Markets have picked up right were we left off on Friday. December wheat has now pushed down into the same sub 5.00 level that the September contract reached last Friday at expiration. Saudi Arabia was active in the market over the weekend as they have purchased 610k MT of wheat in the world market. I have yet to see the actual breakdown but I understand that it will be sourced from Europe, Australia and the United States. SovEcon, who is a private Russian Ag consultancy company, boosted their estimates for the overall Russia crops. The total grain crop is expected to be in the 104 to 106 MMT range, which is up from their previous estimate of 98 MMT. Of this total, wheat is projected to represent 60 MMT, which was up 2 MMT from their last estimate. By no means is this a shocking revelation as these size numbers have been bounced around for some time now but it certainly does little to temper the negative psychology of the market. In fact, it would seem that just about everywhere you turn right now you will uncover a bearish commodity story. If it is not about grains it will be about gold or energies or vegetable oils. When I see information become so lopsided, my contrarian nature begins kick in and I begin to look for a reason as to why the majority could be wrong but unfortunately at this point, it is nearly impossible to find one, or at least one that could stem the negative outlook. It does not sound like the so-called peace in Ukraine will be able to be sustained much longer which could provide a little support. Other than that, we shall see what the weekly exports and harvest updates tell us throughout the day but lacking something really fresh, it would appear that prices will continue to drift lower for now. Corn It is indicative of just how weak a market is when there is a frost in parts of crop production areas and we do not even bat a bearish eye. Granted, we do not know what or if any damages may have occurred and it represented a small portion of the production area but after the hype of the past couple weeks about an early freeze you might have though it would be worth a few clicks higher. This is indicative not only of the potential crop size that we are looking at this year but also the larger disillusion with commodities that is being experienced from the speculative/investment sector. Hedge funds have reduced long holdings in Ag commodities to levels not seen since January and with the news at hand, it would appear that the exodus should continue. The USDA did announce a sale of 120,000 MT of corn to Mexico this morning as they continue to be one of our most consistent buyers. As the “M” in the MIST nations, they will be a country we need to count on and watch as a key consumer of US Ag products in the years ahead. It would appear that the great lakes region has moisture is store for the week ahead but temperatures across the entire upper Midwest are forecast to return to normal to above normal readings. I saw that here in Northern Illinois we could reach into the low 80’s by the end of the week, which would be a full 25 degrees warmer than last Saturday. Evidently with the freeze story now in the rearview mirror, unless we turn excessively wet, most of the action will be centered on yield reports. We could experience a week to 10 days of stable action but I suspect that as the calendar turns over into October, the competition will heat up again as to how large a crop estimate there can be made. Soybeans The bean market begin this new week under pressure but did not press through last weeks lows and have found a little buying now in the daylight hours. There would appear to be little if anything in the news to stimulate much buying outside of uncertainly over possible frost damage to the north and if that is the case, I would not expect to see it carry very far. We will have the August crush number released later this morning with the trade expecting a figure of around 111.6 million bushels. I guess not bad for a period when we were supposed to have run out of beans. Export inspections and weekly crop conditions will be released throughout the day buy I would expect either to be much of a market influence. Ratings should be unchanged to possibly a smidge lower. Like corn, we sit in a very oversold short-term position and could be in line for a week to 10-days of sideways to even higher action. If correct, look for very stiff resistance in November beans back between 10.00 and 10.20.