Rose on Grain – CME Grains Experience Tough Week

April 29, 2019 4:20 pm
Published by

Corn:

CME July corn futures gave up 6 cents on the week, settling at 361¼.  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 higher, which proved to be incorrect.

CME futures continue to be influenced by USDA balance sheets that are less than constructive and by rather disappointing US export data.  Weakening crude futures, an improved weather forecast across the majority of the Corn Belt and strengthening US currency also likely helped to hold CME futures in check.

Net export sales were off Vs the previous sales period while shipments were slightly higher at approximately 31M and 49M bu, respectively.  Sales were ahead of the average weekly pace required to match the USDA’s latest expectation while shipments continue to fall short of the mark.  It continues to look as if the USDA’s export projection is too optimistic.

Domestically, improved weather across major US producing regions is expected to translate to improved planting progress for the week ending April 28.  Ethanol production continues to move higher ahead of the US summer drive season, but burdensome SD balance sheets continue to dominate trade sentiment.

Internationally, weather conditions across South America are expected to continue to be mostly favorable over the near- to medium-term for safrinha production.  Private and public estimates and projections of production across other areas of world production continue to move mostly higher.

CFTC weekly Commitments of Traders data for the week ending April 23 (futures only) showed that the trade significantly reduced their aggregate net short position to around 76M bu, mostly by the addition of fresh longs.  Managed money firms increased their aggregate net short position to more than 1.7B bu, mostly via initiation of shorts.

For this week, the standard weekly technical analysis for and money flow into the July contract remain bearish.  Traders will continue to closely monitor weekly US export data, weather across the upper US Plains, Mid-west and the Mid-south, which is expected to improve over the near-term.  The aggregate spec net short futures position continues to provide potential for a short-covering rally.

Soybeans:

CME July soybean futures lost 27¼ cents on the week, settling at 867.  Last weekend our proprietary models predicted a finish on the week that would be near unchanged to higher, which unfortunately proved incorrect.

CME futures continued to trade lower on disappointing US export business, continued spec outright selling and continued effects of official USDA balance sheets that are quite loose – and that seem likely to become more so.  Strengthening US currency ad improved weather forecasts for major US production regions also likely helped CME futures to a lower finish.

Net export sales were higher Vs the previous assay period while shipments were off at approximately 15M and 8M bu, respectively.  Sales remained well ahead of the pace required to meet the USDA’s latest export projection while shipments were less than 40% of the requirement.

Domestically, current and recent weather conditions continue to suggest that soybean acreage in 2019 is likely to be larger than originally intended, but adjustments may be more conservative than recently suggested.

Internationally, it certainly seems as if the US and China will agree on a trade accord.  However, traders seem to want to see specifics in any deal ahead of sponsoring a futures rally.

CFTC weekly Commitments of Traders data for the week ending April 23 (futures only) showed that the trade enhanced its aggregate net long position to around 173M bu; managed money firms increased their aggregate net short position to approximately 670M bu, mostly via addition of fresh shorts.

For this week, technical analysis for and money flow into the July contract remain bearish, with the market now in an oversold condition.  The market will continue to closely watch US-China trade negotiation progress and weather conditions across major US producing areas, which are expected to improve this week.  Potential remains for a spec short-covering rally/market spike, especially if any unexpected bullish news and/or events are made known to market participants (e.g. an official US – China trade deal).

CME Wheat:

CME SRW July futures lost 5¾ cents last week, settling at 442½.  Last weekend our proprietary models predicted a finish on the week that would be near unchanged to higher, which left us with a modest weekly setback.

Trading action was negatively influenced last week by loose S&D balance sheets, continued disappointing US export business and weakness in CME corn futures – all of which seemed to foster another week of spec outright selling.  Strengthening US currency and private and public estimates of expanding world production were also likely instrumental in the week’s lower settlement.

Net all wheat sales and shipments were higher Vs the previous sales period at approximately 16M and 29M bu, respectively.  Sales were well ahead of the weekly pace required to match the USDA’s projection while shipments were just off the mark.  It certainly appears that the USDA remains too optimistic regarding 2018/19 US export sales.

Domestically, saturated soils and below average temperatures across US producing areas have continued to hinder winter wheat development.  However, USDA winter wheat condition ratings have continued to improve, albeit modestly, as spring wheat sowing continue to run well behind of the 5-year rolling average pace.  The Wheat Quality Council will host its annual HRW tour this week from April 30 through May 3.

Internationally, droughty conditions persist Down Under ahead of the thrust of sowing season.  Elsewhere, Canada is expected to commit its higher area to wheat production in 18 years as disputes with China have curbed the nation’s canola exports.

CFTC weekly Commitments of Traders data for the week ending April 23 (futures only) showed that the trade significantly reduced its aggregate net short position to around 42M bu, mostly through the covering of short positions.  Managed money firms significantly increased their aggregate net short position to approximately 350M bu, mostly via the initiation of shorts.

For this week, the standard weekly technical analysis for and money flow into the July contract remain bearish, with the market also remaining in an oversold condition.  As with corn and soybeans, market participants will continue to watch weather developments over major US producing areas.  The greatest opportunity for upward movement appears to continue to be rooted in spec short-covering potential; both world and domestic balance sheets remain far too burdensome to incite a fundamental rally.

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