Tuesday/Wednesday update this week so far shows wheat having no friends while corn has found willing sellers on rallies. Soybeans and Soymeal have hung in there, testing yearly 2019 lows but recovering into the close. A few weeks back I posited playing strangles into the Feb 8th crop report looking for bigger moves ahead of the USDA and a US delegation to China. Not much has changed regarding trade deals and a cessation of tariffs, therefore the only market to break from its current ranges has been wheat, as both Kc and Chicago have lost over 40 cents in just 4 trading sessions. Weak demand that spurred heavy selling among trend and index following funds has brought the pain for wheat producers and longs in the market in my view. Corn has followed lower albeit by a few cents gaining on wheat amid new shorts entering into the market. It’s as if these new wheat shorts are telling the market to Prove it regarding demand, and in front of future condition reports for hard and soft red winter contracts coming in March regarding supply.
Both wheat and corn could have major bull stories moving forward regarding future demand. The continuation of trade talks moves to Washington this week with the lead Chinese negotiators in town to potentially strike a deal and end the tariff standoff/war. Its been rumored that the Chinese could secure billions in Ag, Livestock,and US energy in a deal out to 2024. That possibility has funds selling that rumor so far in my view. Until particulars of a deal are announced the path of least resistance could be lower. Corn here is at a key point.(See chart below). Bottom edge of a gap sits at 367. If that level can’t hold, I think we could move all the way down to 358.
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