Demand from China, Iowa crop, conditions have all contributed to the recent rallies in Corn and Soybean futures.
Corn and Soybean futures saw an initial pop this week based on fears of damage done to crops in Iowa and other states.
Corn futures finished last week by putting in new contract lows at $3.20, closing the week at $3.21. Keep your eye on Wednesday’s WASDE report for new direction in the soybean market.
As the calendar turned over to May, U.S. weather moved to the front and center of the market’s focus. The dominant feature for the month was the record or near-record rainfall in the central U.S. In the first half of the month, southern Missouri and the adjacent areas were "ground zero," and in the second half, it was the state of Indiana.
Soybeans began the week like they ended last week, on a volatile note as January traded a 14-½ cent range. Weakness was attributed to a continuing run up in the U.S. dollar and a weaker Chinese market. The U.S. dollar continues to see strength as the rest of the world currencies are under pressure and the bond market continues to fall apart which is pushing money to the United States. The Chinese soybean market was down another 5% overnight after dropping 4% on Friday.
There was little doubt at all fund buying was seen in the corn on Monday. Now the next question should be: Is this just a one day buy to start a new month and new quarter or if this is going to be a longer term short covering event for the funds?
As is the case every July, U.S. weather played the dominant role in agricultural futures markets this month. For the corn belt, it was a very good month; it was the fifth rainiest July in the past 121 years and temperatures were exactly in line with the long term averages. Not surprisingly, many have started to discuss record yields for corn and soybeans. We believe that is a reasonable assumption for corn, but a bit premature for soybeans.
The soybean complex came under pressure as the forecast as well as the macro picture were being spun.
An unexpected cut in corn acreage appears to have given corn the added support needed here to hold prices following the aftermath of the yesterday’s USDA WASDE report.
Since the USDA WASDE report is scheduled to be released on Monday, Nov. 10th, it doesn’t appear as though the cotton market is setting up nicely for any substantial moves going into the end of this week.