Cash prices for oilseeds in Brazil collapsed this week after a sharp rise in farmer selling. Farmers in South America have been holding off selling their soybeans and corn hoping for better prices, but with harvest getting close to halfway they have decided to sell aggressively.
The huge size of the selling program has overwhelmed grain merchants who quickly reduced their bidding prices.
Chinese demand has been slower than forecast for this time of the year, but many suggest this has been strategic. The other less talked about factor, is the significantly reduced banking support for commodity merchants. Traders rely on banks for working capital finance to fund inventories and working capital. Credit Swiss was a large banker to grain merchants, and many believe the sharp fall in cash prices in Brazil can be attributed to lack of funding.
The grains market continues to be buffeted by headlines, the demise of the ‘grain corridor’ agreement and the hot and dry weather in the US, versus the consistent macro fund selling creating a lot of price volatility.
Locally, the probability of an El Nino in the spring has increased, but so far, the planting conditions have been excellent.
Barley prices are firmer with the hope that China buys sometime in the future.