Grains continue to surge on weather concerns globally and in the U.S.
Tommy Grisafi, Advance Trading, says it’s the combination of weather problems that have finally caught the markets attention.
Southern Hemisphere problems range from hot and dry conditions in Central and Northern Brazil especially in second crop corn areas, to heavy rains in Argentina and flooding in Southern Brazil.
The corn market may be trading planting delays with heavy rains in part of the corn belt and more precipitation in the forecast.
He says the wheat market is being fueled by dry conditions and even some frost in Russia, plus drought in Hard Red Winter wheat areas.
Speculators have been buying and funds have been covering some of their short positions now that the grains are above the 100-day moving averages. Even soybeans managed to close above that chart level on Monday. “This is a significant chart signal for technical and algorithm traders,” he says.
If the funds keep exiting those positions what kind of rally could that produce? Grisafi says it will depend on weather issues continuing and the amount of farmer selling that may offset the rallies.
However, there is also a possibility that spec traders could eventually go long in the grain markets, which could sustain the rally.
Grisafi says farmers should take advantage of the rally and protect the downside by buying a put option because weather rallies can be fleeting.
Plus, he says the WASDE on Friday could throw cold water on the rally. “The new crop estimates may be a reminder of the larger supplies in the U.S.” he says.
Cattle and hog futures mostly ended lower Monday as cattle ignored the $1-$2 higher cash news in favor of the negative HPAI or H5N1 news.
However, Grisafi says he hopes that news cycle has just about run its course and the market can go back to more common-sense trading.
