Marketing Paralysis Issues in the Ag Industry

While this may be a new week, markets are still being driven by the same fear and anxiety as last. A number of markets gapped higher overnight, most specifically wheat and crude oil, but we appear now to be seeing some of the panic subside. While nothing has officially changed with the situation in Ukraine, Russia has provided an outline for a cease-fire, and calls for western nations to completely stop doing energy business with Putin and buddies were nixed by Germany, at least for now. Pertaining to markets, at least, we cannot lose sight of the fact that these advances will very likely end in some type of a blow-off move, where we gap higher and then end up lower for the week. We have already witnessed the first portion of such a scenario this morning. Marketing paralysis has no doubt set in for many producers, but I would reiterate that scale-up selling at what appear to be profitable levels has been a time-tested recipe for long-term success.

The Commitment of Traders Report that was released last Friday only encompassed trade through the 1st, so it did not really reflect the sheer panic we witnessed into the weekend, but was interesting, nevertheless. Large Specs were buyers of wheat, around 13,000 contracts, but still held a net short position of approximately 10,000 contracts when you combined Chicago and KC markets. They were buyers of a bit over 7,000 contracts of corn and are long a hefty 293,763 contracts and sold just over 4,800 contracts of beans. They are long right at 140,000 contracts in that market. The Managed Money crowd actually bought a total of around 19,000 contracts of wheat and are net-long around 49,000 contracts. It looks like the quarterly bonus will be a big one this year. In corn, they sold 5,200 contracts and 4,600 beans but remain long 349,000 + contracts of corn and nearly 176,000 contracts of beans. It should be interesting to see what they have done come the next report. By the way, large specs purchased 28,478 crude oil contracts that week and are currently long over 429,000 contracts.

One export sale to pass along this morning. China was back for more beans, purchasing a total of 132,000 MT. This was split equally between the current and next marketing years.

While the March supply/demand report will likely be overshadowed by Ukraine, we have a report to digest tomorrow. The trade expects the domestic ending stocks to shape up as follows; Corn 1.479 billion bushels, beans 278 million, and wheat 628 million. The average estimates for Brazilian crops have beans at 129 MMT and corn at 113, and for Argentina, 43.4 MMT of beans and 52 MMT corn. AgRural updated its Brazilian estimate today and lowered the bean figure 5.7 million to 122.8.

Over in the macros, we find equities and financial instruments under pressure. The Dollar has extended higher, gold is strong, and energies are higher but have faded significantly away from the overnight extremes.