Grain Markets Hit By Black Swan

We have known about the coronavirus that began in China now spreading around the world for quite some time. The grain markets have been fretting about the virus since the beginning but the stock market had not been concerned until Friday and this week. The stock market then took the grain markets even lower. This is the definition of the Black Swan.

The Black Swan hitting the markets is an unforeseen event that is totally unexpected taking the markets sharply lower. I don't think there is any question that the coronavirus was a Black Swan event. The funds were already bearish and sold or short corn and beans. This week the funds added to their sold positions a lot. We will not get the Commitment of Traders report until Friday after the close.

I may be twisting myself into a pretzel trying to find a positive side to the selloff in the grain markets but here it is. This week we have seen a huge volume of corn contracts traded. Most days the May and July corn had 400,000 contracts traded. Who was likely doing all the selling? One would think bearish speculators and the bearish funds. Who would be taking the buy side of all that selling?

You would have to think the commercials that want to lock in a low price for corn to export. Plus livestock producers and ethanol plants, and other end users needing corn. Sure, there is no question the bears are in control. However, there are some end users that see a value in corn at these prices?