MarketsFarm — Macroeconomic factors caused plenty of distress on the Chicago Board of Trade (CBOT) for the week ended Wednesday.
Already dealing with whether the U.S. Federal Reserve will continue to raise key interest rates, the collapse of California-based Silicon Valley Bank and concerns over Credit Suisse have rattled global markets, which included a $4 per barrel drop in crude oil prices on Wednesday (all figures US$).
The May corn contract hit its lowest price since last August at $6.0675 per bushel on Friday, while the May soybean contract had a two-week low of $14.80/bu. on Wednesday, losing as much as 50 cents from one week earlier. The May Chicago wheat contract fell to US$6.61/bu. and May Minneapolis spring wheat was as low as $8.10/bu. on Friday, their lowest prices since July 2021. The May K.C. wheat contract dropped to $7.725/bu., a 13-month low, also on Friday.
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Chicago Board of Trade corn futures set contract lows and soybean futures sagged on Friday on expectations that beneficial weather for U.S. crops will lead to bumper harvests, analysts said.
However, Sean Lusk, vice-president of Walsh Commercial Hedging Services in Chicago, said that in corn’s case, prices were declining before due to a record liquidation of 147,293 net long positions during the week of Feb. 28, according to the U.S. Commodity Futures Trading Commission’s (CFTC) Commitment of Traders report.
On Feb. 28 “there were just under 69,000 contracts,” he said. “You had no demand on the market. It was prompted by the Fed. In anticipation, you have to raise ending stocks if you have no demand and now you’re seeing prices dip down under $6/bu. in July corn.”
The week ended with corn prices moving upward due to export sales of more than 1.2 million tonnes of U.S. corn to China, as well as increasing wheat prices due to poor soil conditions in the U.S. Plains. Optimism is also growing that Russia and Ukraine will agree on an extension to the Black Sea Grain Initiative, which could pressure prices.
While crop projections out of Argentina continued to be cut due to drought, soybean prices remained in a downturn.
“We haven’t seen the funds blow out their books in beans as we’ve had in corn here,” Lusk said. “The market is heavily inverted. July/November beans are $1.50 over. July/December soymeal is (48 cents/lb.) over. Historically, (the spreads) are extremely high. That’s what’s pulling the market. The market won’t trade to a carry…Until you see a turnover in those spreads, you buy the dips.”
— Adam Peleshaty reports for MarketsFarm from Stonewall, Man.
