Head of Commodity Strategy, Saxo Bank Group
Summary: Grain prices are on the rise with corn leading the charge. The rally represents a rebound from Monday's trade war lows, with prices rising due to planting delays and short-covering.
During the spring planting period, the US Department of Agriculture provides the market with a progress report every Monday at 20:00 GMT. The latest report highlights the impact of the US midwest having been inundated with rain for weeks. Many fields have been left flooded, preventing US farmers from making meaningful progress.
Only 30% of the corn crop has been planted. That is the slowest pace since 2013 and trails the five-year average by 66%. Soybean planting is off to the worst start in six years but a change towards drier conditions could trigger a rapid pick-up in the planting speed.
The trade war has resulted in a slump in demand from China and that demand may struggle to recover as the African Swine Fewer epidemic in China is likely to trigger a dramatic reduction of the herd. Adding insult to injury, a delay in corn planting could see farmers switch to later-planted soybeans. This apart from periods of technical short-covering should leave the bean struggle to put in a meaningful recovery.
CBOT Corn, December 2019 is targeting the old consolidation area between $3.95 and $4.05/bushel.
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