Grains were higher on Friday and closed mostly higher for the week.
The markets are trading weather and specifically corn, soybeans and soybean meal were driven by both U.S. and South American crop concerns says Don Roose, U.S. Commodities. “Most definitely we added risk premium to the market from weather.”
Southern Brazil has had heavy rains and upwards of 20 inches of rain the last couple of weeks has caused flooding in some key production areas and has stopped the harvest.
“Wet weather is slowing planting in the U.S. but we also see problems in South America. Certainly, the focus on the wet weather for the final harvest for Southern Brazil soybeans. Meanwhile the rest of the country has been hot and dry which is hurting the safrinha corn crop and about 50% of that crop is pollinating. Argentina’s corn crop has had pest issues as well.” he says.
Roose also thinks technical buying has been driving the rally as several of the markets have had chart breakouts.
Corn and soybeans both made new highs for the move on Friday and posted higher weekly closes.
But will the funds continue to cover their short position and even try to go long in the grain markets? He says only if the weather continues to be bullish.
Roose says, “Sometimes you get this fake out breakout in other words you run up and you can’t go any place and that is probably dependent on what happens with the weather. But these funds don’t really show a big push to get out of the market like we see some years. They maybe lighten up a little bit, but they look like they still want to hold a short position.”
