Corn is trading slightly lower this morning after the July contract posted a 7-cent gain last week with prices closing firmly above the 50-day moving average which had been resistance. Basis levels have also improved significantly.
In China, there are plans to cut into the key corn growing area in order to switch some of those acres to soybeans. There has been an oversupply of corn, and the Chinese government is attempting to lessen its reliance on supplies from South America and the US.
Friday’s CFTC report showed quite a bit of short covering with funds buying back 41,024 contracts as of April 23 which leaves them net short 238,546 contracts. First notice day for May corn is tomorrow and funds have likely been rolling out of the May contract.
Soybeans are trading higher to start the week but July futures are still struggling to break above the 50-day moving average and close firmly above it. Both soybean meal and oil are higher this morning, and the recent selloff in palm oil and soybean oil may be attracting buyers at the lower prices.
The US share of Chinese imports has significantly fallen as both Argentina and Brazil continue to put out larger crops each year lessening the need for US purchases. Chinese imports from the US are expected to fall by 24% with Argentina picking up that business.
Funds were buyers of soybeans in last week’s CFTC report, but the move was not as significant in soybeans as it was in corn and wheat. Funds bought back 18,891 contracts of soybeans which still leaves them near record short at 149,014 contracts.
Wheat is mixed this morning as Chicago wheat trades around 8 cents lower, but KC and Minneapolis wheat trade slightly higher. It is not surprising to see some buying pressure as July Chicago wheat rallied over 55 cents last week and met resistance all the way up at the 200-day moving average.
While things like US weather and fighting in the Black Sea regions have caused wheat prices to fluctuate, the biggest influence on prices is likely Russian production seeing as they have supplied wheat to nearly the entire world. Russian forecasters are expecting a drought threat in May in the “breadbasket region” which could significantly impact production.
Last Friday’s CFTC report showed funds buying back 20,219 contracts of wheat which reduced their net short position to 76,184 contracts.
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