Commentary: Thoughts regarding the relationships in the AG sector. The Chinese have begun some purchases today. The exact quantities are not known at this time. However, the market fall put beans and corn in a relative position globally. This allowed the Chinese to buy at a par value. Looking out towards planting, it occurs to me that perhaps the acreage estimates are not set in stone. The Chinese could buy double the amount of beans from the US related to last year. Not double the total global buy, just double what they bought from us. This could give us a meaningful rally flat price in beans and also relative to corn. The current corn bean ratio is approximately 2.5-1. A rally in new crop beans close to $9.00 could start the switch in acres. In addition, it appears wet in the South. This needs to be monitored. A shift to bean acres in theory could mean that the recent dive in corn prices could have put a low in place. Make no mistake, this doesn’t mean we will scream out of here. However, the worst could be over for corn. The May corn marked a low of 332 yesterday . This could be a quantifiable low in the short to medium term. The recent moves in the soy complex have driven oil share down to approx 28.5%. This is 9% lower than the share at year end. This move creates opportunity to hedge margins. In addition it should be watched as the global vegoil remains friendly. It is noted that the collapse of crude has many concerned with blending rates going forward. The duration of the price plunge needs to be considered and followed of course. In my opinion, we are in uncharted territory. It is important to exercise extreme caution. Always have a quantifiable exit strategy win, lose or draw.
John J. Walsh
President, Walsh Trading, Inc.
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