It would appear that there will be a long overdue change in administration in Argentina as the challenger; Mauricio Macri has won the runoff election in that country. Argentina has a long and interesting history of economic trouble with numerous international debt default/restructuring episodes along the way (they have defaulted on external debt seven times in the past 200 years). The most recent was in 2001, which ultimately led to the election of Nestor Kirchner (Peronist) in 2003 who was followed by his wife Christina Fernandez de Kirchner in 2007 after his sudden death, who then held the office through this year with more then enough controversy along the way. Economic conditions and certainly not the business climate improved during the Kirchner reign with seizure of private assets, a very peculiar and controlled currency exchange and a burdensome tax system. As you might anticipate, investment money fled and international trade has been strangled. In years past when we would reference South American production it was as if Brazil and Argentina we always joined in the same sentence but today, Argentina plays a distant backup position. Well, according to promises made by Macri that could change as he has called for the reduction/elimination of the punitive export taxes farmers must contend with. How successful he will be is yet to be seen as the country faces an overwhelming debt load but regardless, the grain and especially the bean markets did not take this as positive news overnight.
Corn, wheat and beans are not the only commodities under pressure this morning as we have red showing in crude oil, metals and many of the softs. Financials and equities are actually acting a bit defensive but the one market with positive action is the US Dollar. Overnight we did poke just through the 1.00 level for the index for the first time since April of this year and sit within striking distance of the peak for the year at 101.22. Needless to say, this is providing the bear with enough confidence to sustain the negative positions that they have on.
Speaking of the bear though, the Commitment of Traders reports issued last Friday indicates that the funds are increasing their short position in corn, beans and wheat and are reaching numbers that are traditionally considered quite large. With the holidays now upon us, and the year-end rapidly approach, a short-coving rebound would not be out of the ordinary.
Last Friday India did report that planting of winter-sown crops was 12.6% lower this year as they have realistically experienced back-to-back drought stimulated by El Nino. During the recent June/September monsoon season, they recorded 14% less rainfall than normal. At this point, our markets have chosen to ignore this situation.
It is still early in the day so we shall see if prices remain under duress in response to the Argentine election. Corn and wheat remain within recent range but this did stab beans into lower lows. At a minimum we should see relatively quiet trade throughout the week.