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3 Big Things, March 20, 2018
DES MOINES, Iowa -- After building up large bullish positions, the funds are liquidating long-the-market contracts, and the corn and soybean markets are paying the price.
Also, investors are waiting with baited breath, regarding a possible announcement this week by the Federal Reserve to increase interest rates. And, the trade tariffs announced recently by the White House are affecting U.S. ag products already, USDA says.
After falling 26¢, yesterday, the soybean market is slightly higher Tuesday.
In overnight trading, the May corn futures are ¼¢ higer at $3.75; July futures are ¼¢ higher at $3.83. May soybean futures are 2¾¢ higher at $10.25; July soybean futures are 2½¢ higher at $10.36. May wheat futures are 4¢ higher at $4.54. In the outside markets, the NYMEX crude oil market is 45¢ higher, the U.S. dollar is higher, and the Dow Jones Industrials are seen mixed.
On Tuesday, the macroeconomic factors will be hard to find, with no notable events scheduled. Very little economic data is expected to be announced. Today, the Federal Reserve starts its two-day policy meeting. On Wednesday, the Fed will release latest monetary policy statement at 2 p.m. EDT.
On the earnings side, today’s schedule is also light.
Funds Sell, Prices Fall
This week’s grain market has featured funds liquidating their long positions in corn and soybeans. Friday’s Commitments of Traders Report noted that funds are now long the corn market with 233,000 contracts. The funds are holding 208,000 long contracts in soybeans. For wheat, the funds are short that market by 6,000 contracts.
Al Kluis of Kluis Commodities says the aggressive stance by the funds going into this week’s market was scary for the soybean market. “When the funds are done selling, corn and soybean price charts are likely to put in a V-type bottom,” Kluis stated to customers in a daily note Tuesday.
In the meantime, Kluis is watching the bull spreads between corn and soybean markets. The spreads were firm, as prices rallied then turned weaker when prices hit their high three weeks ago, Kluis stated.
With the USDA March Prospective Plantings Report released in less than 10 days, funds are expected to be positioning themselves ahead of time.
USDA Secretary Sonny Perdue told members of the National Feed & Grain Association that President Trump’s tariffs on China and other countries have already caused trade disruptions, according to a Reuters report.
On Tuesday, Reuters reported that Perdue “believed agricultural and farm products were the ‘tip of the retaliatory spear’ and would be likely targets for angry trading partners.”
Perdue did not name any specific trade disruptions.