The News & What it Means – Game-changing US Weather & Chicago Grains and Oilseeds Fall.

By John DePutter – March 22, 2017

 

 The News: Weather outlook could be game-changer for U.S. corn, soy planting.

The latest outlook from the U.S. government predicts warmer-than-average weather that could have a game-changing impact when the U.S. corn and soybean planting campaign gets underway…”

– Reuters

 

What it means:

If markets scream higher in March, April and/or May on ideas of weather problems it’ll be too soon for actual, real crop problems. So you’d be looking at a selling opportunity

But that’s a big if.

It’s way too early to get excited.

Yes, weather is THE key factor for corn and soybean prices during the growing season. Always has been. Always will be.

And yes, weather worries often crop up ahead of the critical growing season. Justified or not, this sometimes gets speculators wired up.

Case in point: Last year, when soybeans motored higher in spring on weather problems in Brazil and concerns about US conditions. From under US$9/bu March, they rallied incredibly until they edged above US$12/bu in June. But summer weather in the US turned out just fine, and by harvest-time in October they were back under $9.50.

What about this year?

A few pockets of the US are dry but it’s not something to get alarmed about yet. Especially considering that record-high stocks are on hand to buffer the impact of weather vagaries that trim yields. Corn and beans might not rally much at all. They might be quiet and flat.

For now, keep calm and carry on.
 

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The News: Funds bailed.

Hedge funds and money managers scrapped their long position in corn and soy futures, last week. Their two-month buying binge ended (at least for the time being). Result: mostly lower futures prices.

– From Reuters & other sources.

 

What it means:

We’re not surprised.

On March 9, before the selloff got going, we added lightly to sales of corn and soybeans, in anticipation of this change.

Why did we think this was coming?

We knew that big fund buyers were heavy buyers, placing the markets in jeopardy of declines.

It’s something we try to watch for, on a regular basis. Big spec fund traders can overdo their buying, which puts markets at risk of a downturn. One job of the DePutter crew is try to determine when the funds are over enthusiastic and extended with long positions.

We also try to get an idea of when fund companies are selling extremely heavily and pushing the market too far to the downside.

It’s not an easy job. And monitoring the markets for excessive fund buying or selling is not the only indicator we use.

But sometimes it helps.

Here’s another example: we also noticed that soybean meal futures were heavily laden with bullish spec bets in February and early March. As a result, Ag-Alert did not advise our clients who use soybean meal to forward book a lot.

Sidebar: There were a lot of spec fund buyers crowding into crude oil futures in late winter. As a result we were not terribly surprised to see the breakdown in crude oil the past three weeks. Crude fell more than $8/barrel from approximately Feb 23 to today.

 
 

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