Grain markets turn to WASDE for guidance

A dismal planting season due to heavy rains throughout the US grains belt helped trigger a significant rally during the past month. Corn saw the biggest move due to a combination of a record short positions being held by funds and a record slow planting pace. Soybeans, which can be planted later, have so far been 60% completed and the rally has been less violent than the one that lifted corn due to ongoing Chinese demand concerns.

Wheat, meanwhile, has also turned lower following an initial scare about wet weather damage to the winter crop. The condition of the emerging spring wheat crop has been rated at 81% "good to excellent". Adding to the pressure on wheat have been reports that major competitors led by Russia expecting a significantly higher yield this summer compared with last year's drought-reduced output.

The spectacular race to cut shorts in US grains futures continued in the week to June 4. In just three weeks, funds have bought a record 510k lots of soybeans, wheat and not least corn, with funds having moved from a record short in April to a net-long of 108k lots last week. 

All four major crop contracts have turned lower ahead of today’s WASDE report, which is undoubtedly going to provide some additional volatility. This is particularly likely in corn where the recent stampede to get long could trigger some long liquidation should the estimates turn out to be less bullish than expected.