Louis W. Rose IV
CME Dec corn futures gave up 13¼ cents on the week to finish at 368¾. 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 was incorrect. However, we did not recommend trading this bias ahead of the WASDE report’s release.
CME futures pushed higher on optimism regarding upcoming US – China trade talks in Washington while a slightly higher projection of US ending stocks probably tempered any optimism regarding lower estimates of domestic yield, which were generally expected. Spec short covering likely helped to move the market higher.
In its Sept WASDE report, USDA slightly increased its projection of domestic ending stocks to 2.19B bu on lower yield, which was more than offset by lower consumption; at the world aggregate level USDA also slightly reduced its projection of carryout to around 7.8B bu.
Net export sales and shipments were higher Vs the previous sales period at approximately 49M and 16M bu, respectively. Sales were ahead of the average weekly pace required to match the USDA’s export projection while shipments were well off the pace requirement. The US is 14% committed and 1% shipped Vs the USDA target of nearly 2.1B bu.
Domestically, rain and showers this week are expected to be concentrated mostly across Iowa and Wisconsin. Harvest across the southern states continues to progress; yields remain highly variable, with an expectation for significantly lower production Vs the USDA’s Sept projections.
Internationally, cost of production figures out of Argentina favor soybean sowing Vs corn ahead of planting season, and this news should be taken as, at least, somewhat supportive.
CFTC Commitments of Traders data for the week ending Sept 10 (futures only) showed that the trade reduced their aggregate net short position to around 1B bu while large specs increased their aggregate net short position to around 717M bu. Potential for upward movement, via spec short covering, exists. Still, one must consider that significant short covering likely occurred on Thursday and Friday.
For an in-depth analysis of CFCT data see our weekly CFTC analysis and commentary.
For this week, the standard technical analysis for and money flow into the Dec contract remain bearish, but the market is no longer oversold. Market participants will continue to monitor US weather and crop condition ratings, yield reports and export and ethanol data. Positive news regarding US – China trade talks would also likely be friendly, despite the fact the China is not a major taker of US corn.
CME Nov soybean futures surged last week, gaining 41cents to settle at 898¾. Last weekend our proprietary models predicted a finish on the week that would be near unchanged to higher, which proved to be correct, but Thursday’s WASDE report kept us from trading this bias.
CME futures reacted bullishly to perceptions about improving US – China trade talks and a 3% debit to both domestic and world aggregate consumption in the WASDE report. These factors likely spurred significant short covering.
In its Sept WASDE report, USDA reduced both its domestic and aggregate world projections of 2019/20 carryout 3% at 640M and 2.7B bu, respectively.
Net export sales were higher Vs the previous assay period, while shipments were lower at approximately 114M and 8M bu, respectively. Sales were ahead of the average weekly pace required to match the USDA’s export projection while shipments were well off the pace requirement. The US is 20% committed and 1% shipped Vs the USDA’s target.
Domestically, as with corn, rain and showers are expected across Iowa and Minnesota this week. Record high temperatures and very dry conditions across the southern states continue to significantly reduce yield and production potential.
Internationally, hot and dry conditions across Mato Grosso continue to delay new crop sowing.
CFTC Commitments of Traders data for the week ending Sept 10 (futures only) showed that the trade reduced its net short position to approximately 115M bu, while managed money firms flipped their net long to a short of approximately 450M bu.
For this week, weekly technical analysis for the Nov contract remains somewhat bearish while money flow has turned positive. Market participants will continue to monitor US weather, crop condition ratings, export sales and news relating to US – China trade relations.
CME SRW Dec futures gained 19¾ cents last week, settling at 483½. Last weekend our proprietary models predicted a finish on the week that would be near unchanged to higher, which proved to be correct. Still, as with corn and soybeans, we did not have an opportunity to trade this bias post the WASDE report’s release.
CME SRW futures moved higher in sympathy with the corn market, despite slight to modest enhancements to USDA’s projections of both domestic and world aggregate ending stocks.
In its Sept WASDE report, USDA slightly increased its projection of domestic and aggregate world ending stocks to approximately 1B and 7.8B bu, respectively.
Net all wheat sales were higher Vs the previous sales period while shipments were lower at approximately 22M and 15M bu, respectively. Sales were ahead of the average weekly pace required to meet the USDA’s export projection while shipments were off the pace requirement. The US is 45% committed and 26% shipped Vs the USDA projection.
Domestically, WW sowing will soon be in progress across most producing regions. We continue to expect a small acreage increase for 2019/20 Vs 2018/19. With respect to harvest operations, some producers are reporting sprouting of wheat seed in the head amid very wet conditions; the SW harvest remains well off its rolling 5-year average pace.
Internationally, the drought Down Under continues to worsen, with ABARES cutting its estimate of production 10% Vs June to 19.2M MTs (705M bu). Elsewhere, reports of dry conditions are also being reported across France, Germany and portions of the Black sea region.
CFTC weekly Commitments of Traders data for the week ending Sept 10 (futures only) showed that the trade increased its aggregate net short position to around 265M bu while managed money firms reduced their net short to approximately 45M bu.
For this week, the standard technical analysis for and money flow into the Dec contract remains bearish, with the market no longer in an oversold condition. Market participants will continue to monitor domestic and international weather conditions and weekly USDA export data as WW planting season approaches.
Have a great week!
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This post was written by Louis Rose