Rose on Grain

February 10, 2019 1:25 pm
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Corn

CME Mar corn futures gave up 4 cents on the week, settling at 374¼.  Last weekend our proprietary models (timely predictions published in our complete weekly report) predicted a finish on the week that would be near unchanged to lower, but we did not have an opportunity to trade this bias post the WASDE report’s release.

Trading action for the week was influenced by weak ethanol margins, weakening crude futures, strengthening US currency and, of course, the release of the USDA’s WASDE, weekly export and quarterly stocks reports.  Waning enthusiasm for prospects of a trade deal between the US and China and relatively favorable weather forecasts for South America also likely furthered weakness in CME corn futures last week.

In its Feb WASDE report, the USDA slightly reduced its projection of world ending stocks Vs figures put forth within the Dec report to 12.16B bu; domestic carryout was projected 2.6% lower Vs Dec at 1.735B.  The latter projection was still larger than expected.  Estimated US corn stocks in all positions on Dec 31, 2018 were 7.45B bu, off 4% Y/Y.

For the week ending Dec 27, net export sales were off significantly Vs the previous sales period while shipments were modestly higher at approximately 20M and 40M bu, respectively.  Both sales and shipments were off the average weekly pace required to match the USDA’s export projection.

Internationally, little fresh news, outside of the US-China trade talks and results put forth in the WASDE report, was made known to market participants last week.

CFTC weekly Commitments of Traders data for the week ending Jan 8, 2018 (futures only) showed that the trade mostly liquidated long positions while managed money firms added length via the initiation of new longs and covering of shorts.  On Jan 8, the reported aggregate trade position was 7.45B bu net short while managed money entities were long a mere 350M bu.

For this week, the standard weekly technical analysis for and money flow into the Mar contract have turned bearish, with the market now approaching a short-term oversold condition.  Market participants will likely pay close attention to USDA export data and US-China trade negotiations, but specs may not be inclined to add length - in any of the Ags - ahead of a potential US government shutdown on Friday.  Index fund rolling will conclude this week.

Soybeans

CME Mar soybean futures gave back 3¼ cents last week, settling at 914½.  Last weekend our proprietary models predicted a finish on the week that would be near unchanged to lower, which proved to be correct; nevertheless, we did not have an opportunity to trade this bias after the WASDE report was released.

Last week’s trading action was framed by most of the same factors that affected the corn market, with doubts regarding a near-term US-China trade accord bearing more weight on soybean futures than on either corn or wheat futures.  Too, reports of improving weather across South America, especially Argentina, likely helped to pressure CME futures last week.

In its Feb WASDE report, the USDA notably reduced its projection of world ending stocks Vs figures put forth within the Dec report to just above 3.92B bu, a 7.5% reduction Vs Dec.  Domestic carryout was projected nearly 5% lower Vs Dec, but remain burdensome, at 910M bu.  Year ending domestic stocks in all positions for 2018 were estimated 18% higher Vs 2017 at 3.74 B bu.

For the week ending Dec 27, net export sales were off significantly Vs the previous sales period while shipments were higher at approximately 39M and 34M bu, respectively.  Sales were ahead of the average weekly pace required to match the USDA’s export projection while shipments continue to fall short of the requirement.

Internationally, little fresh news, outside of the US-China trade talks, results put forth in the WASDE report and South American weather, was made known to market participants last week.  However, China was on its annual Spring Festival holiday last week, so more of promised “good will” purchases may be realized over the near-term.

CFTC weekly Commitments of Traders data for the week ending Jan 8, 2018 (futures only) showed that the trade mostly added long positions while managed money firms added length via the initiation of new longs and covering of shorts.  On Jan 8, the reported aggregate trade position was 364M bu net short while managed money entities held a small aggregate net long position of 24M bu.

For this week, technical analysis for and money flow into the Mar contract remain supportive to bullish.  The market will closely watch US-China trade talks while also watching for signs of another government shutdown on Friday.

Wheat

CME SRW Mar futures picked up 7 cents on the week, settling at 517¼.  Last weekend our proprietary models predicted a finish on the week that would be near unchanged to lower, which proved to be correct.  However, as with corn and soybeans, we did not get an opportunity to trade this bias post analysis of the Feb WASDE report.

Trading action last week was framed by most of the same factors affecting CME corn and soybean futures.  The market traded lower on generally bearish WASDE and quarterly grain stocks reports, despite US WW seed acreage at its lowest level in more than a century at a mere 31.3M acres.

In its Feb WASDE report, the USDA increased its projection of world ending stocks 1.7% Vs figures put forth within the Dec report to around 9.67B bu.  Domestic carryout was projected 3.8% lower Vs Dec, but remains burdensome, at 974M bu.  Year ending domestic stocks in all positions for 2018 were estimated 7% higher Vs 2017 at 2B bu.

For the week ending Dec 20, net all wheat sales and shipments were near unchanged Vs the previous sales period at approximately 22M and 16M bu, respectively.  Sales remain ahead of the weekly pace required to match the USDA’s projection while shipments continue to fall short of the pace requirement.

Internationally, GASC (Egypt) has announced that it has sufficient stocks to cover its near- to medium-term requirements.

CFTC weekly Commitments of Traders data for the week ending Jan 8, 2018 (futures only) showed that the trade mostly liquidated long positions while managed money firms added length via the initiation of new longs and covering of shorts.  On Jan 8, the reported aggregate trade position was 375M bu net short while managed money entities were net short approximately 84M bu.

For this week, the standard weekly technical analysis for and money flow into the Mar contract flow remain supportive to bullish.  The market seems likely to weigh in on sparse domestic acreage, especially if a second government shutdown is avoided.

Have a great week!

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Rose Commodity Group offers commodity data analysis, risk management consulting, and provides liaison services to the commodity industry.

This post was written by Louis Rose