Grains ended higher on Tuesday in typical Turn around Tuesday fashion after massive fund selling to start the week. However, any strength in the market continues to be sold by the fund and algorithm traders according to DuWayne Bosse, Bolt Marketing. He says they have a near record short position in the grain markets. In fact, they hold the second shortest combined position across corn, soybeans, meal, oil and the three wheat classes. It is only surpassed by the short in May of 2019 in the middle of the trade war with China.
To get the funds to cover those short holdings would take a major catalyst or fundamental change in the market. Currently, Bosse says he doesn’t see anything bullish enough to make that happen. In fact, he says the news is bearish for corn with a 2.16-billion-bushel carryout. Demand concerns have also crept back into the market with mounting signals of economic slowdown in China.
The one potentially bullish hope was a smaller corn and soybean crop in Brazil due to their historic drought, but Bosse says the likelihood of that is starting to fade as well. While crop estimates in Brazil have continued to slide on soybeans the actual crop size may not be anywhere close to the lowest estimates in the 130 to 135 million metric ton range. Bosse says the evidence of this is the swift drop in basis levels for soybeans in Brazil. “That would indicate that farmers in Brazil are selling the crop as it is harvested and are not worried about production losses,” he says.
