Corn and soybeans extend Monday’s gains and continue to add weather premium with a hotter drier forecast the next two weeks.
Alan Brugler, Brugler Marketing, says those markets just hit new lows last week and so there isn’t much risk premium factored into prices.
“I think we need a lot more weather premium if the forecasts are going to continue to run towards these mid-90s temps and short the Corn Belt on rain. Our models said old crop and new crop corn were also too cheap under $4 if we are going to go down closer to a 2.1 billion bushel carryout,” he explains.
Plus, the funds are covering some of their near to record short position in both crops. Funds are record short in soybeans and just came off a record short last week in corn.
The question is how big of a rally could it produce if the forecast confirms?
Brugler says if the funds covered all of their 300,000 plus short positions in corn the market could see a 50 cent rally, but crop conditions will also have to deteriorate from five to ten points to spark the buying.
According to Brugler, the crop conditions are currently above the five year averages for corn and beans which equates to above the trend line yields suggested by USDA.
Meanwhile, wheat futures ended their winning streak with strong spring wheat ratings and better than expected winter wheat yields.
Brugler says the higher dollar and competition with new global wheat supplies are also holding back the wheat market.
“You’ve got peak supply. The Russians dropped their export tax considerably through the end of the month, they’re trying to buy some export share even though their crop is down,” he states.
Cotton tanks again with improved crop conditions and slow global demand.
“What’s the story? You’ve got increased carryover supplies, you’ve got better crop condition rating and rain on some of that dryland cotton. The market also needs to see some better consumer demand,” he adds.
Cattle extend gains with cash holding together and the futures at a discount.
“I think the market is saying as long as the cash holds together then the board is too cheap,” he explains.
