Hello Pro Farmer Members!
Speculative money continues to actively flow into the long side of the soybean market. Funds have moved from an aggressive short position in early March to a sizable long position, fueling a roughly $1.00 rally in soybean futures. What makes the strong, fund-led price rally somewhat mysterious is that it hasn’t been driven by a strong fundamental reason. In fact, there are a lot of factors -- hefty U.S. supplies, a record South American crop, the start of the South American export season -- that argues against soybeans leading a price rally. But yet, here are soybeans leading the grain and soy complex higher. Because the price surge has been without a fundamental “reason” and fund-driven, it’s hard to predict how much further to the upside futures could extend or when the rally may run out of steam. About the only thing I’m certain of is that futures have rallied further than I (and virtually everyone) anticipated. As a result, the eventual end of the rally will likely be abrupt when it happens and futures will likely pull back sharply. But that won’t occur until the fund buying dissipates. The soybean market is presenting a pricing opportunity that no one anticipated. Use the opportunity to price old- and new-crop bushels.
Funds have also gotten into the act in the corn market. While the fund buying didn’t start as early as in the soybean market and the speculative buying hasn’t been as strong, fund short-covering has supported prices on the rebound from the post-March 31 report lows. Another major difference between corn and soybeans is that funds are still short corn. With planting underway and an “open” 10-day weather window, I can’t see funds moving from net short to net long. But funds may continue to cover short positions as long as they remain buyers in soybeans. Like with soybeans, the eventual end to the price rally is likely to be abrupt. The corrective rebound in corn should also be seen as an opportunity to move some unpriced old-crop supplies and to forward contract some of your expected new-crop production.
Funds are passing the pie. Take pie when pie is passed because you may not get another opportunity at another piece of the pie.
That’s it for now...
... have a great weekend!
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