There appears to be no urgency to own anything s the world is comfortably covered through new crop everything. Weather problems appear to be hiccups as we can plant all the corn, beans, spring and durum wheat, oats, sorghum in an instant given the new technology. Above normal moisture in the 6 to 10 day forecast for the Heartland might be seen as very positive for crop development in the long run as once it gets in the ground there will be ample sub soil moisture to withstand any dry spell.
The USDA will release crop progress numbers tonight and the trade expects to see us well behind schedule. But, given the abundant old crop stocks there’s no need to panic…………………yet! More than a handful of analysts are sensing that corn and other grains might put in a Spring and Summer low this week. May options go off the board and first notice day against the May futures is next Tuesday. Funds are close to a record short in the grains and farmers might not be that aggressive with hedging below the cost of production. We’re waiting for a catalyst to start a short covering rally………….It might not come but at present values we sense that the speculative community sees more upside potential than downside risk. Selling volatility takes a lot of capital and given the makeup of the market with record/close to record fund shorts and seasonal weather scares it’s very dangerous. Bull spreads might be a play in the new crop months. Buying December 2019 corn and selling July 2020 corn(CZ/CS) might be attractive as there’s 4 cents a month already there. Sort of the same for SX/SS but the trade appears to be getting more resolved for more bean acres which might put the kibosh on any new crop rallies. Poor quality Chicago soft red stocks might keep new crop spreads wide if we get normal quality and yields in June/July/August.
Looking for a single digit to 12% of the nations corn crop reported as planted in tonight’s progress report. It is what it is and the weather will dictate the pace for the rest of the month. It’s bad karma but we’re hoping for weather scares and crop failures in other countries while we enjoy bountiful yields. Right now all is well in the world!
The information contained on this site is the opinion of the writer and obtained from sources cited within the commentary. The impact on market prices due to seasonal or market cycles and current news events may already be reflected in current market prices.
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Steve Bruce
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