This is the SFN Market Report with Brooks Schaffer of Palmetto Grain. Reach him at brooks@palmettograin.com or 843-540-4540.
At least when we were on the roller coaster, it went up sometimes. This week has been all about money flow. The spec money has been flowing out of the grains. Changes in the outside markets have not changed the flow as stocks have had some big up days and some big down days but the grains continue to bleed lower. We have broken most major and minor support levels. We are entering the growing season and there is no major threat on the horizon. The crop is a long way from being made and we have very strong demand so I do not think the funds will press the short side yet, but they had very big long positions so just getting out has put tremendous downside pressure on the market.
The question everyone is asking is how much lower can it go? That depends on how long until we get some kind of bullish spark to slow the descent. Administration officials are starting to insist that China is starting to buy more ag commodities to fulfill the purchase commitments they made. The market needs to see signs of that in the USDA reporting. China has received too much rain in their main wheat production areas degrading the quality and size of the crop. The last time they had issues with wheat harvest, they set a new record for wheat purchases from the US. That is not a guarantee but some big purchases by China would really help the market sentiment.
The most obvious things that would help right now are a shift to more threatening weather or some big purchases by China. Outside markets have not had the bullish effect on the grain markets lately. When crude dropped, it pulled bean oil lower and soybeans followed and pulled the rest of the complex lower. Markets are extremely oversold and due for a bounce but the bottom line is we need some sort of bullish catalyst to turn the tide.
We will get weekly condition ratings from USDA going forward on Monday afternoons at 4pm. We will get the May Supply and Demand update on June 11th then the big report comes out on June 30th when we get the Planted Acreage and Quarterly Stocks Report. Weather will matter more and more as we move through the growing season.