Over the weekend I was interviewed by Mike Pearson on Farm Progress' This Week in Agribusiness. We discussed the corn, soybean, and wheat markets. My interview with Mike begins at minute 5:13 of the show. WATCH THE INTERVIEW HERE.
Mike Pearson: … Joining us this week is Darin Newsom, senior market analyst at Barchart. Darin, for the past six months, it seems like news out of South America has been bearish, the U.S. grain markets. That might be changing. Fill us in on what's going on down in South America.
Darin Newsom: Yes, there's it's interesting. This is a time of year when we usually focus on U.S. weather, and it's certainly been a lot to talk about with these storms rolling through the plains and Midwest. All of a sudden, we have to turn our attention back down south because now we're seeing and hearing reports of some major flooding going on over some key areas of Brazil. While I originally thought, maybe this is being overplayed a bit, seeing the videos and hearing the reports, it now looks like this could be one of the this could be one of the commercial factors helping to push the corn market higher. We've actually seen some commercial buying here basically this week since this all has seems to have developed and to a certain degree soybeans as well. We still aren't seeing a great deal of demand coming into either market, at least new demand coming in. We do see that commercial buying. We're seeing the spreads react. We're seeing basis react. All this is telling us that the commercial side seems to be taking this a bit more seriously.
Mike Pearson: Now you mentioned where you might not be seeing too much new buying, Darin, managed money crowd not yet starting to put new longs in place in the corn market.
Darin Newsom: They're not putting new longs in place, but, what will be interesting to see is how much of the short position they continue to cover. It was actually interesting that towards the end of the last week of April, the last yes, the last week of April, we actually saw what looked to be increased net short positions in both corn and soybeans, particularly in the corn market. Now we'll look ahead to Friday's CFTC reports. At this point in the week, since Tuesday, we've seen the market start to move. Look, certainly looks like funds are doing some short covering again.
Mike Pearson: All right, Darin, taking a look over at the soybean market. One of your recent commentaries noted that the basis for soybeans is tightening across the country. At this time of year, what does that tell you?
Darin Newsom: What it tells me is, we know we've got plenty of supplies, but it tells me that we are seeing an increase in demand. Now, maybe we're finally getting that late round of demand from the world's largest buyer just simply hasn't materialized this year. If there's problems in South America, weather strikes, whatever it might be, it's possible that China's finally coming to the U.S. and at least looking for some secondary supplies.
Mike Pearson: All right, so keep an eye on those export reports coming out. Darin, before we let you go, we've got to turn our focus over to the wheat market. We've seen the, well, all contracts really get excited here in the past few weeks. Chicago moved north of $6. It stayed there. Is that the new level of support for Chicago wheat?
Darin Newsom: To me, wheat, Chicago wheat could be anywhere between $4 and $8. $6 is a nice mid-range. Fundamentally, this market is about as bearish as anything I've seen in the last number of years. That hasn't stopped it from going up, though, and it usually doesn't stop it, but it is creating maybe one of the most dramatic rubber band dispositions that we've seen in quite some time. How should we be getting prepared for that, Darren? volatility has gone up, so it's hard to slide some puts in underneath this thing. Obviously, if we can, we're going to want to get some new crop sales, not a lot, but a few new crop sales in place, particularly with rains falling across the Midwest, seemingly increasing the possibility of a better crop, a soft red winter crop.
Mike Pearson: Lots to watch here as this growing season heats up. Our thanks to Darin Newsom, Senior Market Analyst at Barchart. Darin, we always appreciate your insight.
Darin Newsom: Thanks for having me on again, Mike.
On the date of publication, Darin Newsom did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
