The Monday Morning Rant

24/09/12 -- The overnight grains are weaker, led by soybeans in early doors trade Monday morning. In fact as I type (at 7.30am shock, horror) front month Nov 12 beans are 21 3/4 cents easier at exactly USD16/bu. They haven't closed below that level since early July. Corn and wheat are down a bit more modestly.

Informa's revised acreage estimates released Friday, based on the latest survey information from the Farm Service Agency, suggests a higher planted area for both soybeans and corn than previously thought (and larger than the numbers that the USDA is currently using).

Even so, soybean production in the US isn't forecast a lot higher at 2.662 billion bushels versus the USDA's 2.634 billion. Corn output does look a fair bit healthier though at 11.093 billion bushels against 10.727 billion from the USDA.

Informa also released their first thoughts on potential US plantings for 2013, putting the soybean area at an all time high just shy of 80 million acres, and with corn plantings seen exceeding this year's (also re-appraised and increased based on FSA information) 75-year high at 97.537 million acres.

There is also of course, potential record soybean output to come from just about every country in South America in 2013 (assuming that a small thing like the weather plays ball).

The latest Commitment of Traders report from the CFTC shows funds cutting their net longs in corn, soybeans and wheat in the week through to last Tuesday. When the funds are selling the market usually only goes one way. In fact, a bit of research done for a presentation to the Bristol Corn & Feed Trade Association last Tuesday shows that every time funds were net sellers of either soybeans or corn between Aug 1 and Sep 14 the benchmark Dec 12 corn/Nov 12 soybean contract closed lower.

Not that fund activity influences the market of course, that would be a ludicrous suggestion, and one you should be ashamed of yourself for even contemplating. For every seller there must be a buyer, and vice-versa, that's the argument that the CME, the CFTC and numerous others put forward anyway. So it must just be a coincidence that the market closes lower every time the funds are net sellers.

What did the market do every time that the funds were net buyers between Aug 1 and Sep 14 then? Would you like to take a guess? Yes, siree, every single time that they were increasing their long between those two dates the market closed higher. Not just most of the time either, every single time.

Of course there must have been days there when they were neither net buyers or net sellers, what happened then, I hear you idly ponder over your morning cuppa. Yes there were two: Aug 17 when funds were even on corn on the day and the Dec 12 contract closed 1/4 cent lower, and Sep 6 when fund activity was even on soybeans and Nov 12 finished half a cent lower.

Bugger me rigid, it would seem that whenever funds are sellers then that the market comes down, whenever they are buyers it goes up, and when they do nothing it's unchanged. It's as simple as that? That's right, grasshopper.

As of last Tuesday "managed money" as they call it still held a net long of 270,162 corn contracts, 209,875 soybean contracts and 60,541 wheat contracts.

Out of interest, in the case of soybeans nearly 210,000 contracts equates to a net long of around 28.5 million tonnes, or almost 40% of all US soybean production this year. And that's their reduced short as of last Tuesday, prior to that their net long was even larger.