Grains end higher Wednesday in impressive fashion and after a mostly lower start. Livestock close mixed.
Matt Bennett, AgMarket.Net, says the market has been resilient as the funds are exiting short positions in the grains.
“I mean there’s no doubt the funds have trimmed their positions the last few weeks here. They’ve got more work to do with soybeans than what they do with corn. If you look at why the funds have stayed so short soybeans it makes sense. You know there’s a lot of soybeans in the world, domestically there’s a lot of soybeans. But as you get towards end of month and end of quarter there is some stuff going on in the world that has given them an opportunity to go ahead and book some profits,” he explains.
China’s economic stimulus package announced this week and talk of China booking soybeans has also pushed the market.
So do the funds keep buying after the end of the quarter? Do they exit their entire short position and go flat in the market?
Bennett says, “I don’t know if they want to do that yet especially with how the world balance sheet looks, especially for soybeans.”
The rally has been counter seasonal and it is tough to sustain a rally during the middle of harvest due to offsetting hedge pressure.
Yet, he says if the rally continues into next week there may be more to it than just technical buying but he doesn’t see a lot of fundamental reasons for it.
One caveat is if Brazil’s drought would continue to push back soybean planting and cut into production.
The wheat market also saw short covering ahead of the Quarterly Stocks and Small Grains Report next Monday.
Cattle futures ended mostly higher and continue to look technically strong, but have also gotten a push from cash and the stock market.
Bennett says he is not sure if the funds will be willing to push the long side of the futures much farther though.
