Grain market shorts brace themselves for “history-making event”

Corn and soybean futures moved sharply higher during early trade on Tuesday as analysts warned that up to 13 million acres of area could be lost due to persistent rains across key planting areas.

By time of press the July front-month contracts on the Chicago Board of Trade were up 2.5% for corn and 1.5% for soybeans as traders rushed to buy back short positions.

“We have a true problem here, and the most aggressive price moves always occur when funds flip from net short to net long, that’s what’s happening,” said Charlie Sernatinger, a broker with ED&F Man.

Data recorded last week showed the net short position in corn has collapsed to 116,000 lots from 283,000 lots the week before, with soybeans falling to 153,000 lots from 169,000 lots over the same period.

Rain will continue to batter the Midwest this week, according to weather forecasts, although precipitation will be less intense than recent weeks.

Analysts expect some fieldwork to have been done despite the rains, although the estimates for Tuesday’s crop report vary wildly with corn plantings expected to be between 59-65% complete versus 49% a week ago and 90% by this time last year.

Soybeans are expected to be 25-36% complete versus 19% last week and 74% a year ago.

And now some analysts are saying the current crop could be the worst in more than 100 years, with more than 10% of the acreage lost due to sodden ground.

“Going forward there will be 10 million prevent plant corn acres and 3 million prevent plant soybeans. The yield is going down also. This a history making event in US crop production. Few understand the serious situation,” said Chuck Shelby, president of Risk Management Commodities.

Corn futures have rallied more than 18% in the past three weeks while soybeans have rallied just 5% over the same period.

However, with continued rain forecast, there is some concern that the corn rally could spill into soybean futures as delayed plantings expected to switch from corn to soybeans may not occur.

“The trade is focused on short covering in corn, which is lifting nearby contracts higher. Say the same planting problems arise for soybeans later this planting season, the same thing could happen to CBOT soybeans,” said Terry Reilly, an analyst at Futures International.