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Middle Tennessee | Guys, enjoyed many, pretty much all, of your posts lately, hope that comes across. I updated my blog with below
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The gazes of many bullspreaders and marketers of soybeans are trained on the price chart gap from the second Sunday night in September. Before soybeans broke and held above $13.00, the objective of filling that gap seemed perhaps a long shot. But this week, with soybeans consolidating support at $13.20 in anticipation of a curtsy from the USDA toward Chinese soybean purchases, the bulls got just that. A gap fill now looks to be a high probability outcome.
You may recall the environment that Sunday night when the gap appeared. The years-running bull market in corn semi-officially ended with expiration of September 13 corn. Basis fell off a cliff, cash prices and futures turned depressed fast. That, as Hedgie put it, was a turd in the punchbowl for the soybean party. Hedgefunds had temporarily sucked all they could out of long soybean-short corn positions, and had trouble getting even shorter corn while getting longer soybeans. So they got less short soybeans, and to some--but not me--it looked as though soybeans might in fact follows corn's lead downward.
Then, Chinese importers went on a weeks-long orgy of soybeans orders and shipments, quickly setting a pace that cannot be sustained with available stocks. The market had two options, wait for exports to evaporate overnight and USDA-booked sales to be cancelled, or buy now in case they don't. The shipments will fall off, but if the most current demand persists many more weeks, we may run out of beans first. The scale of the latent short-term demand in the Chinese market, and the US meal market, will determine what follows once the gap is filled.
News in the corn market has been a steady diet of bear feast. The Obama administration weakened the RFS, the record Canadian wheat crop just keeps getting bigger. And even before these events, many said that USDA projections on corn use were overly sanguine. But right in the midst of the worst of it, with 30 million bushels of corn homeless at sea, sitting in overseas ports after rejection by Chinese authorities over genetically-modified inventory was detected, the corn market did something unexpected. It rallied 5% off a key reversal at $4.18. And with today's USDA report, it turns out that some, like JonSCKs, were correct, demand is not behind schedule, it is ahead.
USDA was less kind today to wheat than to corn and soybeans. I have suggested that it was global demand for US wheat showing surprising strength, but the bursts of buying out of Brazil and China have not maintained their urgency, and the wheat market is back to the lows.
For now then, soybeans exhibit a clear uptrend. The current very short term trends are positive for corn, but at some point the hedge funds will re-test recent lows. Long and short term trends in wheat are terrible, although it's difficult to imagine there is much down side remaining.
It's tough to state that these markets have shaken the damage from the second week in September, or state that corn and wheat have found bottoms. It will be interesting to observe which of the two can bottom out first. For now, it looks like corn and wheat prices may flounder about a while longer, with even further increases in premium to soybeans over them.
Edited by LongKC 12/11/2013 00:38
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The Second Sunday in September
