Special Market Update
Grain Market Commentary
Monday, June 18, 2018
By David Gleason, Associate Merchandiser, The Andersons
The Perfect Storm
December corn has managed to make contract highs and contract lows all with in the span of 16 trading session. Some traders want to blame trade wars for the weakness in grains this past week, but the story runs deeper than that. The crop is off to a phenomenal start on the year with funds going from over 200,000 contracts long to what is likely a small short today (chart below).
Crop conditions are also off to one of the best starts in history with some calls for a 180+ bpa national yield. While it may seem too early to solidify anything yet with pollination coming up in a few weeks, the funds will not be caught long if there is a chance that the carryout pushes back up towards 2 billion bushels or more.
Amidst these factors we’re seeing some interesting currency moves. The dollar is on the rise as interest rates alongside a supercharged US economy propel investment into the greenback. The Brazilian Real is trading lower while the Argentinian Peso has been in a complete tailspin. These factors are piling on to an already challenging export landscape.
While it might feel like December corn is oversold right now, there are plenty of good reasons for it to be trading where it is. The chart has done some serious technical damage in the last few weeks and with fresh contract lows today it’s hard to say where the bottom will be. With the June report and pollination ahead it is a little too early to count corn completely out, but for now it appears to be priced right.