Rose on Grain – CME Grains and Oilseeds Explode on Various Factors; Can it Endure?
Louis W. Rose IV
Corn:
CME Dec corn futures gained 18¾ cents on the week to finish at 359¼. Our proprietary model (timely predictions available in our complete weekly report) called for a finish on the week that was to be near unchanged to higher Vs the previous Friday’s settlement, which proved to be correct.
The corn market moved notably higher on continued dryness across the western Corn Belt, strengthening US export data and weakness in US currency.
Domestically, USDA condition ratings of this season’s crop took a notable hit for the week ending Aug 23. The western belt will likely see some shower activity this week (it is raining in portions of Nebraska and Iowa at the time of this writing) while central and eastern areas of the belt are expected to see heavier rainfall.
Net export sales were higher Vs the previous sales period while shipments were lower at approximately 11M and 37M bu, respectively. Both sales and shipments were off the weekly pace required to match the USDA’s export projection. The US is 99% committed and 94% shipped Vs the USDA’s target. New crop sales were strong at more than 46M bu.
Internationally, China has officially reiterated to trade representative Lighthizer its intent to meet its Phase One trade agreement commitments, which is supportive.
CFTC Commitments of Traders data for the week ending Aug 25 (futures only) showed that the trade increased its aggregate net short position to approximately 760M bu while large specs reduced their aggregate net short position to around 356M bu. Potential for a spike or rally at the hands of spec short covering remains in the market, although we expect most of any such rally has now been realized. Trade selling signals that the market’s rally is likely overdone.
For an in-depth analysis of CFCT data see our weekly CFTC analysis and commentary.
For this week, the weekly technical analysis for and money flow into the Dec contract are bullish, with the market now significantly overbought. Weather reports and, perhaps, early harvest reporting from the southern US and US export data seem likely to be major market-moving factors for both corn and beans this week. The corn market has begun the new trading week with move to the upside.
Soybeans:
CME Nov soybeans gained 45¾ cents last week, finishing at 950½. Our proprietary model called for a finish on the week that was to be near unchanged to higher Vs the previous Friday’s settlement, which proved to be correct. Still, we elected to remain short, which we regret.
CME soybeans finished notably higher on improved export data, increased crop stress due to pockets of droughty conditions across the western mid-western US and positive trade vibes from China. Weakness in US currency likely helped to support CME futures on the week.
Domestically, as with corn, the condition of this season’s crop remains strong, with reductions to the condition of the crop for the week ending Aug 23 much less severe than those for corn Major US producing regions are expected to see modest to significant rainfall this week.
Net export sales and shipments were higher Vs the previous assay period at approximately 2M and 47M bu, respectively. Both sales and shipments were ahead of the average weekly pace required to match the USDA’s export projection. The US is 106% committed and 96% shipped Vs the USDA’s target. New crop sales were strong at around 69M bu.
Internationally, China continues to purchase US soybeans despite political tensions with the US; the buying is generally thought to be the result of China’s efforts to rebuild its swine herd, post its recent decimation at the hands of a swine flu outbreak. News of China’s intention to meet its Phase One commitments has been, of course, more supportive for soybeans Vs corn ad wheat.
CFTC Commitments of Traders data for the week ending Aug 25 (futures only) showed that the trade slightly increased their aggregate net short position to approximately 1.4B bu while large specs trimmed their net long to around 521M bu.
For this week, the weekly technical analysis for and money flow into the Nov contract are bullish with the market moving further into overbought territory. As with corn, soybeans have started the new week higher.
CME Wheat:
CME SRW Sept futures gained 13¾ cents on the week to settle at 548¾. Our proprietary model called for a finish on the week that was to be near unchanged to higher Vs the previous Friday’s settlement, which proved correct. However, we ultimately decided to remain short.
CME SRW futures were higher on the week in sympathy with strength in the corn market, improved US export sales and weakness in US currency.
Domestically, the US harvest season is essentially complete. Current strength in wheat futures continues to present potential for enticing US producers to increase area committed to winter wheat sowing this fall. And, the sowing season is nearly at hand. This could be especially true across southern US cotton producing areas if relative strength in soybean futures endures.
Net all wheat sales and shipments were higher Vs the previous sales period at approximately 28M and 24M bu, respectively. Sales and shipments were ahead of the average weekly pace required to meet the USDA’s export projection. The US is 45% committed and 23% shipped Vs the USDA target.
Internationally, there have been reports of damage to the South American crop at the hands of heavy rains.
CFTC Commitments of Traders data for the week ending Aug 25 (futures only) showed that the trade increased their aggregate net short position to approximately 444M bu while large specs flipped their net short to a small net long of around 7M bu. Trade selling into the current rally is not supportive.
For this week, the weekly technical analysis for and money flow into the Dec contract remains bullish with the market now notably overbought. Since CME wheat has moved through staunch resistance near 550, 575 and 600 should now provide strong resistance, should the market approach such levels.
Have a great week!
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This post was written by Louis Rose