Louis W. Rose IV
CME Mar corn futures gained 6 cents last week to finish at 590. Due to the WASDE release we did not recommend trading any bias last week for corn, wheat, or soybeans. Mar corn is treading water, so far, this week.
The corn market finished higher, despite maintenance of strengthening US currency and on continued strength US export sales. The Dec WASDE was mostly viewed as neutral, and we concur.
In its Dec WASDE report, the USDA held its 2021/22 domestic carryout projection unchanged Vs the previous report at approximately 1.49B bu, which remains bullish. Aggregate world carryout for 2021/22 was projected slightly higher Vs Nov at just north of 12B bu.
Domestically, harvest of the 2021 crop is, effectively, in the books, with trader attentions now turning to 2022 acreage, domestic offtake, and dry conditions across the southern Great Plains.
Net export sales were higher while shipments were slightly lower Vs the previous sales period at approximately 45K and 36M bu, respectively. Sales were again head of the pace required to meet the USDA’s latest projection while shipments were again well off the pace requirement. The US is 58% committed and 17% shipped Vs the USDA’s target. Sales are well ahead the average expected pace for this point of the season; shipments are off their expected pace.
Internationally, there is general optimism regarding production prospects for the new crop across South America, with many projecting new crop production well ahead of USDA’s expectation.
CFTC Commitments of Traders data for the week Dec 7 (futures only) showed that the trade increased its net short position Vs the previous assay period to approximately 3.2B bu while large specs increased their net long to around 1.6B bu.
For an in-depth analysis of CFTC data see our weekly COT analysis and commentary.
For this week, the weekly technical analysis for and money flow into the Mar contract remain bullish, with the market overbought. Export data, foreign crop reports, and geopolitical concerns seem likely to be major market moving factors for corn, wheat, and beans over the near-term.
CME Jan soybeans gave gained ½ cent last week to finish at 1267¾. The Jan contract has commenced the new week slightly lower.
CME soybeans finished near unchanged on fresh USDA balance sheets that were effectively unchanged Vs the Nov report, a continuance of strong US export data, strength in US currency, and strong expectations for new crop across South America.
In its Dec WASDE report, the USDA held its 2021/22 domestic carryout projection unchanged Vs the previous report at approximately 340M bu (a bullish figure). Aggregate world carryout for 2021/22 was forecast slightly lower at around 3.75B bu.
Net export sales and shipments were higher Vs the previous assay period at approximately 60M and 89M bu, respectively. Sales and shipments were again well ahead of the pace required to meet the USDA’s latest projection. The US is 70% committed and 42% shipped Vs the USDA’s target. Sales are notably ahead the average expected pace for this point of the season; shipments are also ahead of the expected pace.
Internationally, growing conditions remain generally favorable, with Conab predicting record production for the new crop. Overall, expectations are high for aggregate South American new crop production, with many believing the crop will prove significantly larger VS USDA’s expectation.
CFTC Commitments of Traders data for the week ending Dec 7 (futures only) showed that the trade increased its aggregate net short position to approximately 822M bu; large specs reduced their net long to around 122M bu.
For this week, the weekly technical analysis for and money flow into the Jan contract remains bearish.
CME futures finished lower, on strengthening US currency, higher projected domestic and world aggregate carryout, the market’s technically overbought condition, and weakness in US export data; geopolitical concerns across the Black Sea region carry potential for both bearish and bullish reactions, depending on how events unfold.
In its Dec WASDE report, the USDA projected 2021/22 domestic carryout 3% higher Vs the previous report at around 598M bu; the adjustment came per a lowering of USDA’s export projection. Aggregate world carryout for 2021/22 was projected modestly higher at almost 10.25B bu.
Domestically, dryness across much of the Great Plains continues to cause concern for 2022 production. Sowing of the new WW crop is complete, with nearly 100% of the crop emerged. The new crop (US aggregate WW) was last rated in 42% good, or better, condition.
Net export sales were higher while shipments were lower Vs the previous assay period at approximately 9M and 8M bu, respectively. Both sales and shipments were off the average weekly pace required to meet the USDA’s official target. The US is 64% committed and 44% shipped Vs the USDA target. Sales are modestly ahead of the average long-term pace for this point of the season while shipments are significantly off their expected pace. SRW sales were higher at around 2M bu.
Internationally, weather across the Black Sea region (especially Russia) remains generally favorable for winter crop development. The enhancement of Russia’s export tax seems likely to materialize. Still, the most pertinent news is that tensions remain high across the region, with Russia congregating troops along its border with Ukraine.
CFTC Commitments of Traders data for the week ending Dec 7 (futures only) showed that the trade reduced its aggregate net short position to approximately 392M bu while large specs flipped their net long to a small net short of around 6M bu.
For this week, the weekly technical analysis for and money flow into the Mar contract remain bullish, with the market no longer in an overbought condition. The 800 level is now a point of initial resistance.
Have a great week!
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This post was written by Louis Rose