Rose on Grain – CME Corn and Wheat Finish Week Higher, Soybeans Effectively Unchanged

October 25, 2021 4:27 pm
Published by

Louis W. Rose IV

Corn:

CME Dec corn futures gained 12¼ cents last week to finish at 538.  We did not recommend trading any bias for corn, soybeans, or wheat last week. 

The corn market finished higher on strengthening US export sales and weakening US currency value.  Imminent index fund rolling likely helped to hold Dec corn in check.

Domestically, the US harvest, outside of the southern states where the harvest is effectively complete and where yield reports have been mostly strong, continues at a quick pace.  Major US producing regions are expected to see harvest delays from showers this week.  For the week ending Oct 17 the US crop was estimated at 52% harvested, 11 percentage points ahead of the rolling 5-year average pace.

Net export sales and shipments were higher Vs the previous sales period at approximately 50K and 41M bu, respectively.  Sales were head of the pace required to meet the USDA’s latest projection while shipments were again well off the pace requirement.  The US is 46% committed and 7% shipped Vs the USDA’s target.  Sales are well ahead the average expected pace for this point of the season; shipments are also ahead of their expected pace.

Internationally, the World Bank continues to predict higher Ag prices through 2022.  Ukraine is expected to see a significant increase in its production this season Vs last year. 

CFTC Commitments of Traders data for the week ending Oct 19 (futures only) showed that the trade trimmed its net short position to approximately 2.3B bu Vs the previous assay period; large specs trimmed their net long to around 1.06B 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 Dec contract remain bearish.  Weather and harvest reports will likely be major market moving factors over the near-term for corn, beans, and wheat while index fund rolling could mean weakness for corn and wheat.

Soybeans:

CME Nov soybeans picked up 2¾ cents last week to finish at 1220½.

CME soybeans finished near unchanged, despite strengthening US export data, recent notable increases to the USDA’s domestic and world aggregate carryout projections and weakening US currency.

Domestically, as with corn, harvest of the US crop is underway, with yield reports mostly better than originally expected.  Southern yields are also, in general, better than originally expected.  As with corn, harvest progress will likely see some delays this week.  For the week ending Oct 17 the US crop was estimated at 60% harvested, 5 percentage points ahead of the rolling 5-year average pace.

Net export sales and shipments were higher Vs the previous assay period (and notably strong) at approximately 106M and 81M bu, respectively.  Sales and shipments were again ahead of the pace required to meet the USDA’s latest projection.  The US is 51% committed and 10% shipped Vs the USDA’s target.  Sales are well ahead the average expected pace for this point of the season; shipments are also ahead of the expected pace.

Internationally, sowing across Brazil continues, with Conab predicting record production for the new crop.

CFTC Commitments of Traders data for the week ending Oct 19 (futures only) showed that the trade reduced its aggregate net short position to approximately 512M bu; large specs reduced their net long to around 76M bu.

For this week, the weekly technical analysis for and money flow into the Nov contract remains bearish, with the market no longer oversold.

CME Wheat:

CME SRW Dec futures gained 22 cents last week at 756.

CME futures finished higher in sympathy with corn, failing to move lower despite notable slowing of US export sales, on recent tightening of the USDA’s domestic and aggregate world balance sheets and weakening US currency.

Domestically, current wheat and soybean prices had many US cotton producers considering more acreage to the double crop rotation this fall.  However, a late cotton crop, a wetter than average fall, and skyrocketing cotton prices seem likely to hold southern wheat acreage in check.  We still think that soybeans, which are much less expensive to produce per acre than cotton, could curb expected cotton area in 2022.  Private estimates of planted area continue to come in higher Vs USDA.  For the week ending Oct 17 sowing of the US crop was estimated at 70% complete, effectively on par with the rolling 5-year average pace.

Net export sales and shipments were lower Vs the previous assay period at approximately 13M and 6M bu, respectively.  Both sales and shipments were off the average weekly pace required to meet the USDA’s official target while shipments missed the mark.  The US is 52% committed and 35% shipped Vs the USDA target.  Sales are ahead of the average long-term pace for this point of the season while shipments are off their expected pace.  SRW sales were notably higher at almost 1.9M bu.

Internationally, weather across the Black Sea region (especially Russia) is generally favorable for winter crop development.

CFTC Commitments of Traders data for the week ending Oct 19 (futures only) showed that the trade reduced its aggregate net short position to approximately 335M bu while large specs increased their net short to almost 98M bu.

For this week, the weekly technical analysis for and money flow into the Dec contract remains supportive to bullish, with the market approaching an overbought condition.  The 700, 675, 650, 625, and 600 levels are downside targets with 775 and 800 likely to evince significant to strong resistance.

Have a great week!

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    This post was written by Louis Rose