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| Today was essentially the first day of the year where we managed to take out the previous days highs in the grains.
This came after all the markets posted fresh lows yesterday before rallying to end the day.
However, the soybean sellers win once again today. As both corn and soybeans closed well off their highs and soybeans closed the day fractionally lower.
Overall some "signs" of reversals, but nothing quiet yet for bulls to write home about, as we failed to confirm any reversals with the funds selling the rally.
Wheat on the other hand strings together 3 green days in a row in hopes of a reversal with short covering and strong weekly export sales.
The key for prices will be the funds. Do they want to continue selling? Or is enough enough?
If the funds do decide to cover, it would result in a nice rally given they are sitting on some very heavy shorts across the grains. Yet to be determined..
The funds are short somewhere around -240k contracts of corn. That is a huge amount. What happens when they are forced to cover? They will be forced to buy a massive amount of corn.
So that is actually one of the best things corn has going for it right now, the fact that the funds are holding massive shorts. Timing of when they will decide to cover is the bigger question.
Over the last 10 years, there has been 3 years the funds entered the new year with -150k or short shorts. All 3 years we rallied. Will this year be the 4th?
The funds also hold the biggest short in soybeans since February of 2020.
Here is what a few had to say about the funds:
From Harvest Trader:
"By no means a bull, trust me. But eventually we will run out of sellers for now... shorts will feed on themselves..."
From Options Trader Brian Wilson:
"The catalyst that starts a rally in the grains may not be a number crunching reason of weather. It may just be, enough is enough."
Then we also still have the Brazil corn situation which has the “potential” to still be a bullish wild card.
Here is what a few others had to say about that:
Farm Futures asked:
"Anything on the horizon that could inspire a price rally for corn?"
Highly respected Naomi Blohm replied with:
"Weather for safrinha corn has to be perfect. Demand for Brazil corn equals 131.5 million metric tons. Currently the USDA has Brazil corn pegged at 127 million vs 137 last year. Approximately 32 million is growing right now, with 95 million pegged for the 2nd crop, which hasn’t been planted yet."
From Kevin Duling:
"I have to think South America will bring some fireworks as we get further into the Safrinha crop. It's just being planted now, so we're a ways off yet, but more rain now means more delays. More delays mean more corn trying to pollinate in the hot, dry season as opposed to their ideal season."
Following a historic 3-month long drought in Brazil where nearly every area ranked dead last in precipitation on record.. January saw some rains.
Rains now will not make much of a difference to the soybean yields. However, too much rain could create more problems as harvest gets underway and lead to delays for the second corn crop.
So yes, rain now would actually be beneficial to prices….
Read the rest of todays market update where we go over everything you need to know going on in the markets, managing risk & more
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