Rose on Grain

February 24, 2019 3:09 pm
Published by

Corn:

CME May corn futures picked up 1¾ cents on the week, settling at 384½.  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, which resulted in a small weekly loss.

CME corn futures found support on the week from projected tightening (USDA) of domestic carryout for 2019/20, despite an expected planted area of 92M acres.  Firming crude futures also likely provided market support while export data that suggest the USDA’s export projection remains too high likely limited weekly upward movement.  Weak ethanol margins continue to apply drag to market activity even as President Trump mulls enacting year-round E-15 use.

For the 6-week period ending Feb 14, net export sales and shipments were approximately 238M and 217M bu, respectively.  Sales were ahead of the average weekly pace required to match the USDA’s export projection while shipments fell short of the requirement.

Internationally, private estimates of safrinha production in Brazil are moving higher, as are public and private estimates of this season’s production in Argentina.

CFTC weekly Commitments of Traders data for the week ending Feb 5 (futures only) showed that the trade covered shorts and liquidated longs while managed money firms added length via the initiation of both longs and shorts.  The reported aggregate trade position was 3.62B bu net short while managed money entities held a small net short of around 33M bu.

For this week, the standard weekly technical analysis for and money flow into the May contract remain bearish.  Market participants will likely continue to digest a constructive US S&D balance sheet and the likelihood of further enhancements to South American production estimates.

Soybeans:

CME Mar soybean futures picked up 2¼ cents last week, settling at 923¾.  Last weekend our proprietary models predicted a finish on the week that would be near unchanged to higher, which proved to be correct.

CME futures found support last week from optimism regarding US-China trade talks, which included a commitment by China to purchase another 36M+ bu of US soybeans.  Further reductions in most private estimates of Brazilian production also likely provided support as did (likely) the USDA’s domestic planted acreage projection of 85M acres.  However, USDA also projected 2019/20 ending stocks at 845M bu, which is far from bullish.

For the 6-week period ending Feb 14, net export sales and shipments were approximately 240M and 205M bu, respectively.  Sales were ahead of the average weekly pace required to match the USDA’s export projection while shipments continued to fall short of the requirement.

Internationally, private estimates of production in Brazil are stabilizing while both public and private estimates of Argentinian production are moving somewhat higher.

CFTC weekly Commitments of Traders data for the week ending Feb 5 (futures only) showed that the trade initiated more longs than shorts while managed money firms mostly added longs.  The aggregate trade position was 323M bu net short while managed money entities held a net long position of around 58M bu.

For this week, technical analysis for the May contract remains supportive while money flow has turned bearish.  The market will, no doubt, continue to closely watch US-China trade talks and firming estimates of production estimates across South America.

CME Wheat:

CME SRW May futures gave up 15¼ cents on the week, settling at 491¾.  Last weekend our proprietary models predicted a finish on the week that would be near unchanged to lower, which proved to be correct.

Trading action last week was framed by a myriad of bearish factors.  USDA projected carryout for 2019/20 of 944M bu, while off significantly Vs 2018/19, is still a bearish figure.   Too, there are no signs, despite a litany of rumors, that Russian sales and exports are slowing.  Further, it is becoming increasingly evident that China is unlikely to purchase a significant amount of US wheat and that US export sales are likely to fall well short of the USDA’s current projection.

 

For the 6-week period ending Feb 14, net export sales and shipments were approximately 131M and 93M bu, respectively.  As with corn and soybeans, sales were ahead of the average weekly pace required to match the USDA’s export projection while shipments remained well short of the requirement.

CFTC weekly Commitments of Traders data for the week ending Feb 5 (futures only) showed that the trade added shorts and liquidated longs while managed money firms covered more shorts Vs the addition of longs.  The aggregate trade position was approximately 344M bu net short while managed money entities held a small net short of around 33M bu.

For this week, the standard weekly technical analysis for and money flow into the Mar contract flow remain have turned bearish, with the market now in an oversold condition.  CME wheat futures may find some support this week on the market’s oversold condition and increased competitiveness of US stocks for export.

Have a great week!

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This post was written by Louis Rose