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The soy complex on Monday got a taste of the extreme volatility that’s cascaded through commodity markets since late last year, unfortunately it was all to the downside. While President Donald Trump’s threat to delay an eagerly anticipated summit meeting with Chinese leader Xi Jinping was the spark, a build-up of speculative long positions may have set the stage for a selloff.
Both May and July soybeans fell 70 cents, the daily limit, while May and July soybean oil fell 350 points, also the daily limit.
Weekly data from the Commodity Futures Trading Commission released Friday showed that through March 10, speculative traders added another 23,205 net long contracts in soybean futures and options, taking the long position to 222,107 contracts. Speculators added another 33,329 contracts, taking their position to 108,838 contracts.
Strong buying across the grains sector lifted the net long speculative position in soybeans, corn and KCBT wheat to fresh year-on-year high, noted Ole Hansen, head of commodity strategy at Saxo.
Check out this week’s Pro Farmer Podcast: We break down the latest twist in U.S.-China soybean diplomacy and the implications of the JBS packing plant strike in Colorado.
Oil slips, stocks rally: Outside markets continue to set the tone. On Monday, a fall for crude oil on hopes for a meaningful pickup in traffic through the Strait of Hormuz set the stage for a rebound in equities. That may have served to fuel some outflows out of grains, which appeared to benefit last week from surging oil prices and fears that a resurgence of inflation could be in store as a result of rising crude prices.
West Texas Intermediate crude oil futures fell 5% to $93.50 a barrel. Brent crude, the international benchmark, dropped 2.8% to $100.21 a barrel. The Dow gained around 388 points, or 0.8%, while the S&P 500 advanced 1% and the Nasdaq Composite rallied 1.2%.
Commodity rally evolving?: When it comes to the broader commodity markets, the inability of gold to catch a bid despite an escalating Middle East conflict and fears of a global energy and food supply shock is particularly eye-catching given the precious metal’s reputation as a safe haven. April gold on Comex is down 4.7% since Feb. 27.
It’s important to “be very alert to what is behavior different than what your own intuition might suggest,” Christopher Verrone, chief market strategist at Strategas, told Bloomberg Television early Monday morning. “Gold is number one on that list. If you had just read me the headlines two or three weeks ago you would have said, ‘OK, gold is going to $6,000.”
The fact that it hasn’t is a reflection of the “blowoff-like conditions” that prevailed as gold and other precious metals surged from October through January, he said. Now “silver acts a lot worse here, platinum acts bad, palladium acts bad. I think these are all going lower.”
Meanwhile, the commodity bull market appears to be diversifying, he said. “For much of the last two or three years it was precious metals, exclusively. I think that’s less the story going forward. I mean, these grains have all broken out, I think the industrial metals are still in better condition than the precious – something there is evolving.”
Wild weather: U.S. hard red winter wheat areas saw mostly dry weather during the weekend, with peak wind gusts of 40 to 76 mph as temperatures dived from highs in the 70s and 80s Fahrenheit early in the weekend to temperature Sunday afternoon in the 30s and 40s north and 40s and 50s south, said World Weather Inc. Hard freezes were seen deep into the Southern Plains Monday morning and will do the same into the southeast U.S. Tuesday morning.
Low temperatures today slipped to 9 Fahrenheit in northwestern parts of the Texas Panhandle and to 1 degree in west-central and northwestern Kansas. That’s after temperatures in the afternoons Friday through Sunday hit the 80s, “creating quite a stressful environment for cattle and other livestock in the region due to the wild swing in temperatures and the strong wind speeds,” World Weather wrote. U.S. HRW wheat areas are expected to be dry over the next 10 days to 2 weeks, with temperatures set to rise quickly this week to unseasonably warm to hot readings by the end of the week – weather that isn’t good for already damaged and stressed wheat.
- Rain must fall immediately and cooler temperatures are needed, the forecaster wrote.
Brazil soybean forecast unchanged: Pro Farmer crop consultant Dr. Michael Cordonnier on Monday left his estimate of Brazil’s soybean crop unchanged at 178 million tons, with a neutral to lower bias. Brazil soybeans were 61% harvested as of late last week, according to AgRural, an advance of 10% for the week. The harvest is being slowed by wet weather in northern Brazil, while yields have suffered due to dry weather in Rio Grande do Sul.
- Cordonnier is keeping a close eye on Rio Grande do Sul, noting that Emater has lowered its estimate for the state to 19.0 million tons, down 2.4 MT, or 11.3%, from its original estimate of 21.4 MT.
Cordonnier left his Brazil corn estimate unchanged at 133 MT, with a neutral to lower bias. He left his Argentina soybean estimate unchanged at 47 MT, with Argentina corn at 53.0 MT, both with a neutral to lower bias.
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