The grain markets are entering 2017 with a very mixed setup. Wheat and corn saw a reflation theme emerge in the second have of 2016 after falling to a deeply oversold position. Soybeans bottomed in August 2016 and have seen solid gains from those lows. Global economic news continues to suggest positive growth for 2017. The markets seem to have “priced-in” the massive stocks seen on December 1st, but demand has been better than expectations. Macro factors look to remain positive, as meat consumption in China and Southeast Asia remains on a very solid growth trend. And with the large population in Southeast Asia, even a minor increase in per capita meat consumption level will have a significant impact on total grain consumption.
Recent US economic data has also shown some signs of improvement, with industrial production, housing starts and jobless claims all indicating positive progression. While the bearish supply fundamentals for grains are well known, the big picture demand fundamentals look to be gradually improving.