Grains head lower overnight with soybeans taking the biggest hit giving up 20 cents. In outside markets, crude oil recovered from yesterday’s losses while equity futures had a slightly weaker tone in the night session.
Markets seemed poised to turn to the reality of the fundamentals. Overnight, Goldman Sachs stated to clients “While this recent rally has the potential to run further to the upside ... we believe that it is not yet driven by a sustainable shift in fundamentals.” Yesterday, the Buenos Aires Grains Exchange dropped its 2015-16 soybean crop estimate to 56 million tonnes from its previous 60-million-tonne forecast. Minutes later the agriculture ministry marked its estimate down to 57.6 million tonnes from 60.9 million tonnes. Some analysts have been talking about a 15 MMT loss in Argentina but the reality could be something substantially smaller like 5 MMT.
Corn and wheat made bearish key reversals on the charts yesterday which could cause selling pressure to intensify. Brazil corn sees showers expand into the southwest 2/3 of the belt early next week to ease stress. Showers remain limited in the northeast 1/3, leading to ongoing stress into early May. Rains in the far south stall soy harvest, but the 6 to 10 day turns drier. In Argentina, rains (.25 to 1”, locally 2”) were confined to northeast fringes of the corn/soy yesterday. Light weekend showers (.25 to .75”, locally 1.5”) cross the belt. Drier conditions then settle in for much of the next 10 days. Harvest should improve in the southwest 2/3 of the belt, while recovery in the northeast 1/3 will still be very slow.
NOTE: CME Margin Rates for soybeans have increased from $1,500 to $1,750 per contract on hedge accounts
In outside markets, crude oil was moving higher and seemed poised to make a run at the near-term high of $44.45 a barrel. Later today the Baker Hughes rig count will be out and will likely show a continued decline in active US rigs.
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