Farewell To Bearish July
This appears to be another one of those “I hate commodities” Monday mornings, as we have pretty broad-based selling. Grains, energies, and most soft markets are under pressure, but the real damage has been reserved for the gold market.
I traveled 1,400 miles over the past couple days, with a portion of that traversing Nebraska, Iowa, and Illinois. Unfortunately, I have to report that the poorest looking crops seen were from the Mississippi River east into northern Illinois. In fact, Iowa and Nebraska look great. Gauging from the DSMG virtual crop tour this past week, it does sound as if outside of the areas in Illinois, Indiana, and Ohio that have suffered from the extreme moisture, that assessment would be pretty close.
Weather and reports are the topics du jour. Albeit at a reduced rate it, would appear that rains will continue to fall across the southern reaches of the Midwest as we move into the first week of July. With some areas already receiving 400% plus of normal in the past few weeks, any is too much. On the other side of the coin, those west of the Rockies extending all the way to Canada have been experiencing a record heat wave, along with France and parts of Eastern Europe.
We witnessed another solid round of short covering in grain markets yesterday and for a while at least, the same in beans. It would appear that the fund bear has grown increasingly uncomfortable with the short positions they were holding in front of the upcoming reports and have elected to or, in some case, were forced to elect a move for the exit. Realistically, the only news of substance right now is weather. At this time of year, it really is the most important topic.
Understandably, most of the focus for the next week will center on the June 30 Quarterly Grain Stocks and final acreage report. Of course, adding an additional level of uncertainty to the acreage number will be debates over how many acres will be abandoned. The argument can be made that we had a similar situation in the northern Plains last year, and the overall impact on number of acres in production will be limited. Of course, that does not compensate for the variation in production between the different regions.
In the immortal words of Yogi Berra, “It is deja vu all over again.” Just like on Friday, we have a number of commodity markets under pressure with the most convenient rationale provided being a higher dollar and, in the grain and soy complex, the added pressure of a rain-makes-grain mentality.
Even though it would be surprising to see any significant changes on the production and supply/demand reports to be issued later this morning, we suspect for the most part the trade will basically be twiddling their thumbs are we await the report.
Evidently when the President of the United States, while conversing with other heads of state makes a comment that the strong US dollar is a problem, currency traders find that a reason to sell dollars, go figure.
The comment was relayed by an unnamed French official and the White House has since stated that no such comment was made, but the damage had been done at that point. Those darn French, must have been confused in the translation. Regardless, the weak dollar has been one of the reasons for the strength witnessed as we begin this week.