None of LKCW’s subscribers seem to have noticed my absence, but somehow how the direct-deposit debits continue to clear every month. So I owe you guys an appearance. And it’s not easy to pick up this blog after so many months; so much has happened to me, to you, and within the grain markets I am challenged to recall what I was talking about in the past whatsoever. So without more of a transition than that, let’s take measure of the grains.
Things were looking good 48 hours ago, or at least better. That was when the USDA published their monthly supply-demand forecast, and for a few brief hours Tuesday afternoon it looked like there might be something to talk about other than copious quantities of rain falling throughout the midwest and the sinking South American currencies. The report’s numbers were modestly bullish, with global and domestic inventories of corn set for sizeable declines, even into marginally tight balance. The report felt like a relief with big closes in corn and wheat Tuesday afternoon, and an apparent likelihood the late spring bear markets in corn and soybeans might give way to some buying. But by dinner at the p.m. open the WASDE buying was revealed to be nothing more than a day trade. Tuesday was not the best evening for a grain trader to have after-dinner drinks as it turned out.
By the wee hours of the morning Wednesday, corn, beans, and wheat had taken out the pre-release lows. Moving into close of trade Thursday, the daily price charts for corn, beans and wheat had backed themselves into an awkward and vulnerable position. So what apres event undid the WASDE in a few short hours? It was a leak from the Trump administration to Politico that Trump’s trade warriors were imminently set to promulgate a bunch of tariffs on the Chinese. In such moments, you can hear the cheers from farmers everywhere as the far-away largest importers of US corn and soybeans (Mexico and China) mull expanding retaliatory edicts directly targeted at US agriculture. Those cheers were reminiscent of those arising as Carl Icahn’s appointee to the EPA recently sucked market value out of RINS credits and cash corn by waiving legal requirements of well-connected refiners, while plotting to rewrite the Renewable Fuel Standard itself. I don’t know if Icahn has Trump short corn or what, but the moment the EPA gives up on their dastardly schemes out of political pressure from the Midwest, Trump expedites his tariffs on our best customers.
Whatever the case, here we are, with US crops developing in stellar conditions, weather cooperating, foreboding price charts, serious threats to demand, and the prospect of large speculators flipping sides and committing short. Even considering all that, I would rather be long than short in corn and wheat tonight, maybe even soybeans.
Here are the reasons. Wheat first and with the most confidence. Cash wheat markets are telling a different story than the futures. Into the gut of harvest, basis of key deliverable ports is positive, from the Great Lakes to the Southern Great Plains. That is impressive, and if it persists, it will make it difficult for aggressive shorts to sustain price pressure into the upcoming delivery period. Furthermore, international markets are not yielding near as much, and the spreads are putting US wheat on the verge of global competitiveness, even considering the US dollar’s strength of late. For corn, the Brazilian safrinnah crop is shrinking considerably and US corn is continuing to move into the summer export market with good weekly numbers for old crop sales. The July corn contract is not usually the one to fail, if we are not already there yet. And then there are beans, which, if you know me, you know I never want to say anything bullish about. Especially tonight, when the Chinese might come in Sunday evening cancelling 3 million tons of old crop commitments on the books. But, meal prices in China are finally firming a little, and again, US spreads to competitors is becoming favorable. Ordinarily people would be be buying our beans here, it’s just a question of whether they hate Donald Trump so much that they are determined to find another way to feed their hogs. Maybe we’ll know more in a few days.
That’s all from beautiful Bozeman MT, and I will see you in the wheat pit!