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Middle Tennessee | Credits to frogfarm for nosing out the Argy bean imports, please forgive my little indulgence in political humor
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In the last installment of this wander through the darkness, I said I’d try to keep my eye on today’s closing trends for any clues, and that I’d be paying attention to the weekly USDA export books. Breakfast’s most bullish moment was the soymeal report of nearly 300 tons of meal committed overseas, a much larger number than the recent normal. At that moment, it looked like the whole soy complex could have a big day building on late-week strength through Thursday night and Friday morning. Vegetable oil was being carried away by the stiff crude correction, with meal and beans holding their own towards the top of the near-term range. At the end of the day though it was only corn bulls who could claim small victories on the day and the week.
I won’t try to explain why meal puked an outside reversal down on the day and a doji top on the week with the excellent export numbers. But there may be reasons for the recent strength, from supply and demand sides.
On the demand side, Chinese import of feed goods has been very strong recently in spite of the headlines on commodities and Chinese growth. (Aside: the persistence of above-projection demand might turn on the world’s dominant livestock market: hogs in China. Dim Sums today had a tough time getting a read on the situation)
http://dimsums.blogspot.com/2016/01/hogs-rebounding-in-china-pick-y...
On the supply side, the news pace has been brisk recently out of Argentina, which leads the world in meal exports. Argentina has suffered right along with everyone else through the current depressed conditions in commodities. Maybe making matters worse there, the country has been shunned from international bond markets since reneging on loans during a crisis at the turn of the millennium. A couple months ago the leftists were kicked out of office. The new open-markets guy, Macri, slashed taxes on corn and wheat exports and backed off supporting the currency. The policies unleashed a sudden and massive inventory of corn and wheat on to the world export markets in December. But domestic holders of soybeans remained tighter. The USDA even reported small imports of soybeans from the US this week. The lack of a bean gush from Argentinian storage may have nudged meal demand back to the US some. Macri was hobnobbing in Davos today trying to woo the world’s bond dons.
http://www.reuters.com/article/us-argentina-president-idUSKCN0V00UP
A few months back, US billionaire trader Paul Singer—one of the country’s leading supporters of Republican PACS—successively sued the Argentinian government in US courts over a debt he bought for about a penny on the dollar.
http://www.bloomberg.com/news/articles/2015-05-12/singer-s-latest-a...
If I were an Argentinian farmer, I would tell him he could have about as many of my soybeans as he can shove up his arse.
From a bigger picture, the ags continue to rattle around in a range from this summer. Funds have covered a fair chunk of their shorts this week, but they remain stoutly short. Painfully for the bulls it sometimes seems the crude oil cuts grains from both sides. When crude fails it brings biofuels with it, and when it rallies it brings along the stock market and the dollar index. In this environment I’m giving corn the best chance for price strength. It had the best technical performance for the week, and the South American production cycle might tip more risk premium in corn’s direction.
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LKCW Nightly: 1-22
