CNS Canada — Soybean, corn and wheat futures in the U.S. are all seeing some strength from weakness in the U.S. dollar, and could have more room to the upside as speculators cover large net short positions.
“The managed money is just looking for trades of value,” said Sean Lusk of Walsh Trading in Chicago.
Money moving into the agricultural commodities was driven in part, he said, by weakness in the U.S. dollar index, which has moved to its lowest levels in three years amid a more dovish outlook from the U.S. Federal Reserve.
With energies and metals on the rise, the sentiment appears to be “So why not grains?” said Lusk.
For corn, the underlying fundamentals are bearish with high supplies, inconsistent demand, and not a lot of weather premium, he said.
However, the market keeps finding support around the $3.50 per bushel area (all figures US$).
“Corn’s pretty cheap at $3.50, so we’ll get an upward bias in the market,” said Lusk. He placed upside resistance in the nearby contract at around $3.62-$3.65.
He placed resistance in the Chicago March wheat contract at $4.40-$4.42, while March soybeans face an upside target of $10.04.
Beyond the support from the weaker U.S. currency, “weather will have to drive us,” said Lusk, pointing to dryness concerns in Argentina.
Demand, especially from China for corn and soybeans, will also be watched closely going forward.
— Phil Franz-Warkentin writes for Commodity News Service Canada, a Glacier FarmMedia company specializing in grain and commodity market reporting.