Farmers and speculative traders are selling corn, soybeans and wheat worldwide.
Open interest in agricultural commodities has diminished for fund traders. Fiber prices are weakening in the face of lower grain prices as oil prices fall pulling support. Stronger dollar values reduced export demand. Market traders believe fund trader rebalancing is complete. Profit taking from buy positions is putting pressure on prices.
Fund traders sold over 4,000 soybean contracts last week. World demand is shifting toward less expensive soybeans from South America. The trend in soybean markets is turning down going into planting season. This is the opposite of the normal seasonal price move. Trend traders are selling as soybeans become available from South America.
China has indicated an oversupply of soybeans in reserve. Freight capacity is occupied by soybeans. Terminals, ships and holding facilities remain full of beans traveling to importing countries. Beans in transit limit the ability to ship grains.
Chinese soybean prices are down as credit tightens in China. Palm oil prices have dropped 2 percent pulling support from soy oil. Weekly export inspections of 45 million bushels were down. Total inspections are 69 percent of USDA projections where average is 49 percent.
Fund traders sold 8,000 corn contracts last week. Ethanol prices are pressured by falling oil prices. Overall corn demand is decreasing as dollars gain strength. Trading volume in corn and wheat has increased while prices have dropped. This indicates short selling by market bears. Those studying market analysis have indicated corn prices could test the market year low price near $3.15.
Corn export inspections were 30 million bushels. Last week’s export inspections were 24 million bushels. That 6 million bushels positive move did not affect prices. Total corn inspections are 29 percent of projections. The average for the previous 5 years is 36.5 percent. Corn sales are good, 116,000 tons on Jan. 19. Chinese corn prices are up 25 percent. Chinese corn production is below the annual use rate.
Traders sold 4,000 wheat contracts last week reducing the net long contract advantage in the market. Wheat is leading the drop in agriculture commodity prices. Lower grain prices are attracting buyers, but most wheat sales are going to Europe and the Black Sea region where prices are a dollar lower than U.S. wheat prices.
Wheat fundamentals remain bearish. Supplies of wheat are ample around the world. Plantings of winter wheat are down. Planting intentions regarding summer wheat may be dropping also. Technical charts for wheat are all negative. Bearish market fundamentals indicate long term price pressure. Technical charts indicate lower prices in the short term. Traders are liquidating by contracts.
Wheat export inspections were below expectations at 9 million bushels. That number is down from 12 million last week. Total export inspections are 2 percent below average at 62 percent.
Rice production estimates were increased. Most of the production increase and corresponding carryover supply increase was for medium grain rice. Long grain rice production was little changed and supplies will remain near the same. The current sell off maybe overdone in Chicago, especially as prices drop below $14.
World wheat supplies are huge and the potential for substitution of wheat for rice is bearish. Rice market exports hit a yearly high of 193,000 tons. Long grain rice supplies are decreasing slightly. Rice exports have been slow this week. Export projections indicate rice supplies will remain nearly the same. Planting intentions are increasing for rice. Growers will take acres from soybeans if current price trends continue.
Weekly cotton exports hit a record high last week. The drop in grain and soybean prices is keeping the pressure on cotton prices. Fundamentally cotton supplies are tight. However, as soybean prices drop, more acres are expected to shift from beans to cotton. The pressure for cotton to buy acres with higher prices is diminishing daily.
Open interest in cotton is dropping. Fiber markets are vulnerable to profit taking where traders liquidate buy positions after the fall rally. Outside markets are not supportive as dollar values rise and other commodities like gold and oil drop. Cotton is oversold but it will take positive news to move prices.