The grain markets closed sharply lower today. Yesterday's positive session did not see follow through buying as corn, beans, and wheat finished with double digit losses and right on the lows of the day. Crude oil turned from higher to lower, as the dollar traded over 300 points higher to $79.50. We are near 6-month highs in the US dollar. The dollar rally and grain selloff looks to be the outcome of growth concern in China. A slowdown in the Chinese economy will be negative to all commodities. Yet, the largest bearish fundamentals continue to be the negative numbers from last month's supply/demand report. The abundant supply along with the excess available spring acres continues to pressure the market after any strength, as seen yesterday.
Demand for corn and wheat should start to increase as prices are currently on a large break and nearing contract lows. An increase in demand for beans will still be difficult to achieve with a steady South American harvest just around the corner. Meanwhile, the EPA finalized some regulations for their renewable fuel program. There were no major changes. A report can be found at http://www.epa.gov/otaq/renewablefuels/index.htm To add to the negativity we will have to watch open interest in the grain markets. A large amount of longs have been added since last year and with the downward movement many "trend following" funds may start changing their position.
Tuesday the 9th is the next USDA crop production and supply/demand report. Although no major changes are predicted the USDA could easily throw in more surprises. Analyst estimates will be out later this week. Otherwise, the next major report and trend changing data will come forward in March with the updated USDA numbers and prospective planting.
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