Grain Spreads: No Fear

Sean LuskGeneral Commentary

“There’s too much of everything” and “rain makes grain” have been the bearish theme’s in grain and livestock this Spring. A shift in market psychology is needed for the Bulls to regain some semblance here or it will be only a matter of time until we see Corn with a $2 handle and Soybeans with a $7 handle in my view. Funds are heavily short corn but are neutral the soy sector, long beans and short meal and oil. Their wheat positions lack conviction on either side and are near neutral as well. The fight to stave off deflation has taken its toll on both the grain and livestock sectors. Supply bottlenecks have hurt many producers as futures prices for grain and meat plummet. At the same time, prices for pork and beef are rising at the grocery store. There are winners in this Covid economy with one being the meat packer. In my view they are making money hand over fist in both sectors, aided by the USDA data that tells us we have to much of everything now, with more coming in the months ahead. Corn will be over 80 percent planted, with Soybeans just above 60 percent come Tuesdays crop condition report. Wheat still needs to finish and then be harvested. There is time for Mother Nature to present issues with future production and create fear, which could create a bid in the market. So far though there isnt much fear. We have witnessed weather threats before stoke a fear or unknown induced supply side rally. In my view there are discounts all over the Board going out to early 2021. Ive been previously commenting that if one wants to go long or take a shot a buying some previously seen levels using options, our view is to utilize longer term deferred months. No trade recommendations this week.

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Sean Lusk

Vice President Commercial Hedging Division

Walsh Trading

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