“Sell in May and Go Away” has been an old adage in stocks for years. Sometimes it has worked, others not so much. I’m not sure this adage has ever been applied to the grain trade as planting begins and uncertainties in the growing season are magnified. Sell after 4th of July weekend might be more apt for corn and beans in prior years. Under such circumstances, the grain market has previously found a bid in May/June. This crop year has been different so far with tariffs and trade wars amid to much old crop excess in corn, wheat, and beans. Funds as of last week totaled 692 K shorts in seven exportable grain contracts. Managed Money expanded their short positions which stood at 440 K in early April approximately 250 K across seven contracts. The last CFTC report showed these funds short (Corn- 346 K, Bean 133 K, KC Wheat 54 K, Chicago wheat 76 K, Minneapolis wheat 12,500 K, soy meal 19.6 K, and bean oil 51 K. ) Judging the price action Friday, Monday, and Tuesday that position may be understated as the soy and wheat complexes traded to new year lows and in KC wheat’s case, decade lows.
Today saw funds start to cover especially in corn. Was today the first day of a new month that saw funds short cover and take profits? Or is it Mother Nature halting planting progress in the North and East of the Mississippi and Delta. Weather forecasts have it cool and wet into Mid-May where major producers like Illinois, Indiana, Ohio, Wisconsin, and Michigan await drier ground and sunshine. Or it could be optimism of a trade deal with China (Don’t laugh). There’s noise from Senator Grassley and Ag Secretary Perdue that its close and the Chinese have been asking about corn and ethanol. That’s the noise I’m hearing in the market. We’ve heard this noise on trade before but its important to note the Chinese trade delegation is back in the States next week. Take a look at Dec 19 Corn. It closed above 384.4 (Red Line). That was the March closing price after the most bearish of crop reports, the end of month 1st quarter grain stocks and planting intentions. If we hold 384.4, we negate the April break and can challenge 392 and then 4.00. One can buy futures at 384.4 with a tight stop at 378 or Buy the Dec 19/Dec 20 corn spread at 28 cents Dec 19 under, with a stop at 32.4. Charts below. Call me at 888 391 7894 or email me at slusk@walshtrading.com. Funds sit record short in corn and beans coming into this week amid record short all seven exportable grain contracts. We may have some reasons why they might lighten up their most aggressive short in the market.
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