Rose on Grain

March 10, 2019 4:02 pm
Published by

Corn:

CME May corn futures gave up 8¾ cents on the week, settling at 364¼.  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 proved to be correct.  However, we did not have an opportunity to trade this bias post the WASDE report’s release.

CME corn futures traded lower on a relatively bearish WASDE report, weakening US export sales, continued diving wheat futures, weak ethanol margins, poor domestic transportation logistics, slow producer selling and strong estimates of safrinha production in Brazil and overall production estimates from Argentina.

In its Mar WASDE report, the USDA reduced its projection of world aggregate carryout approximately 1% VS Feb to 12.15B bu while also increasing its estimate of domestic carryout by around 1% to 1.835B bu.  The increase in expected US ending stocks came on lower projections of domestic exports and consumption (mostly ethanol).

US net export sales and shipments for the week ending Feb 28 were approximately 38M and 22M bu, respectively.  Sales remained ahead of the average weekly pace required to match the USDA’s export expectation while shipments continued to fail to meet the pace requirement.

Domestically, it is time to plant corn across the southern US, and excessively wet to saturated soils could translate into lower than originally planned corn acreage.  More rain continued to fall across the Mid-south and the southeastern states last week and over the weekend.

Internationally, private estimates of safrinha production in Brazil are moving higher, as are public and private estimates of this season’s production in Argentina.  Weather conditions across South America are expected to be mostly favorable for corn production this week.

CFTC weekly Commitments of Traders data for the week ending Mar 5 (futures only) showed that the trade reduced it aggregate net short position to approximately 639M bu, mostly via the covering of shorts.  Managed money firms increased their aggregate net short position to around 964M bu, mostly through the addition of fresh shorts.

For this week, the standard weekly technical analysis for and money flow into the May contract remain bearish.  Slow producer selling and the potential for spec short-covering could cause the market to spike over the near-term.  Too, traders will likely focus increasing attention on the annual USDA Mar acreage report, scheduled for release this year on Mar 29.

Soybeans:

CME May soybean futures gave up 15¾ cents last week, settling at 895¾.  Last weekend our proprietary models predicted a finish on the week that would be near unchanged to higher, which proved to be incorrect.  However, we did not trade this bias due to the Mar WASDE report’s release.

CME futures moved lower last week in sympathy with the grains, the continued lack of a formal trade accord with China, weakening US export data and slow producer selling.  Strengthening US currency and a projected domestic carryout of 900M bu added further bearish sentiment to the market.

In its Mar WASDE report, the USDA reduced its projection of world aggregate carryout approximately 1% VS Feb to 3.9B bu while also trimming its estimate of domestic carryout to 900M bu, which is far from a bullish figure.  The USDA did not reduce its estimate of US exports, although most market participants, including us, think that such was/is warranted.

US net export sales and shipments for the week ending Feb 28 were notably lower Vs the previous sales period at approximately 11M and 36M bu, respectively.  Sales were well off the pace required to meet the USDA’s latest export projection while shipments were just ahead of the pace requirement.

Internationally, private estimates of production in Brazil and Argentina continue to stabilize, with weather conditions across the latter expected to be mostly favorable over the near-term for production.

CFTC weekly Commitments of Traders data for the week ending Mar 5 (futures only) showed that the trade reduced it aggregate net short position to approximately 82M bu, mostly via the covering of shorts.  Managed money firms increased their aggregate net short position to around 234M bu, mostly through the addition of fresh shorts.

For this week, technical analysis for and money flow into the May contract are bearish, with the market now moving into oversold territory.  The market will, no doubt, continue to closely watch US-China trade talks and updated estimates of South American production.  As with corn, traders will likely focus increasing attention to the USDA’s annual Mar acreage report.  The spec aggregate net short position could provide market spikes on any unsuspected supportive to bullish news.

CME Wheat:

CME SRW May futures lost 17¾ cents on the week, settling at 439½.  Last weekend our proprietary models, which have been quite good over the long-term, predicted a finish on the week that would be near unchanged to higher, which proved to be incorrect given that we traded this bias ahead of the WASDE report’s release.

Trading action last week was framed by a very bearish WASDE report, strengthening US currency and further technical selling and stop orders.  Poor transportation logistics, increased storage fees and slow producer selling were also contributing factors to the market’s continued weakness.

US all wheat net export sales and shipments for the week ending Feb 28 were slightly higher Vs the previous assay period while shipments were off at approximately 23M bu each.  Sales were again ahead of the weekly pace required to match the USDA’s projection while shipments continued to fall well short of the pace requirement.

In its Mar WASDE report, the USDA reduced its projection of world aggregate carryout approximately 1% VS Feb to 9.94B bu while also increasing its estimate of domestic carryout by around 4% to nearly 1.06B bu.  The increase in expected US ending stocks came mostly via a lower projection exports (965M bu) which we think will ultimately be trimmed further.

Internationally, prices for Russian stocks for exports have continued to move lower, which is yet another bearish factor for CME futures.

CFTC weekly Commitments of Traders data for the week ending Mar 5 (futures only) showed that the trade mostly covered shorts, trimming its aggregate net short position to approximately 70M bu.  Managed money firms mostly initiated shorts, increasing their aggregate net short position to approximately 370M bu.

For this week, the standard weekly technical analysis for and money flow into the Mar contract remain bearish, with the market remaining in an extremely oversold condition.  CME wheat futures may find some support this week on the market’s oversold condition, increased competitiveness of US stocks for export and the potential for short-covering via spec profit-taking.

Have a great week!

Subscribe to be notified when this post is updated!

---

This Market Report constitutes copyrighted material and may not be reproduced in any manner, either in part or in whole, without prior written consent from Rose Commodity Group. However, redistribution via forwarding of the full link to the report is permitted. Quotations (limit 3) from the report are permitted, so long as they are accompanied by attribution to Rose Commodity Group and a link to the full report.

---

This publication is presented for informational purposes only. While the information contained herein is believed to be accurate and factual, the possibility of error exists. Commodity trading is an inherently risky proposition and there is no guarantee that trades based on the information enclosed herein will result in profitable outcomes.

Tags:

This post was written by Louis Rose