Market Commentary > Mid-Week Grain Wire

Mid-Week Grain Wire

Jun 05, 2019

There’s an old saying that a “bull market needs to be fed every day”, and today it looks like fresh fodder for the bulls is not in the bunker. Price weakness could be attributed to several factors. Several sources reported on Tuesday that approximately 40 million bushels of corn have been contracted to be shipped between September and January from South America. It is reported that ADM is shipping the corn to Smithfield Foods in the southeastern US.

The record delay in US plantings and abundant supplies in South America make the economics of the move feasible. Brazil is currently harvesting their second crop of corn amid a nice price rally because of the uncertainty about corn plantings in the US. South America had projected an increase in corn exports even before the weather problems developed in the US. The last time substantial exports from South America came into the eastern US ports in the Carolina’s was during the US drought of 2012.

We should expect to see more of this as we move through the marketing year. This is also a reminder that the markets work and always figure a way to solve a problem.

There are two major fundamental issues impacting the market. African Swine Fever and the short US corn crop. Neither of these is a quick fix and both will have a long-reaching impact on the commodity and livestock markets.

Traders are still trying to come to grips with unprecedented planting delays. There’s literally no history to draw from for the current situation we find ourselves in. The closest similarity was 1993, but that year was different in that the crop got planted and then the flooding conditions moved in to wash the crop away and reduce final production. Today’s unprecedented environment and lack of historical data to draw on makes for nervousness and certainly disrupts the funds and computer trading signals. The funds appear to have liquidated their short positions but are reluctant to build a long position until the next piece of evidence presents itself to give them the confidence to do so. For the time being, price action appears to have hit a holding pattern.

Today, June 5th is the prevent plant date for Ohio farmers.

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