Louis W. Rose IV
CME Dec corn futures gained up 16¾ cents last week to finish at 553¾. Last weekend our proprietary model predicted a finish for the week that was to be near unchanged to lower Vs the previous week’s settlement, which proved to be incorrect.
The corn market finished higher on weakening US currency, a decrease in the USDA’s weekly crop condition ratings, and reports of localized flooding across some major producing areas.
Domestically, the latest USDA crop ratings showed the crop rated in 60% good, or better, condition, off 2 percentage points Vs the previous release. The upper Midwest is expected to see significant rainfall this week. There has been localized flooding across the upper Midwest, but, overall, we expect the rains have been more beneficial than not for the crop. Corn harvest has commenced across southernmost producing regions, with early yield reports remaining favorable. However, Ida will likely limit harvest operations this week.
Net export sales and shipments were lower Vs the previous sales period (sales notably so) at approximately 260K and 30M bu, respectively. Sales were ahead of the pace required to meet the USDA’s latest projection while shipments again fell short of the pace requirement. The US is 100% committed and 94% shipped Vs the USDA’s target. 2021/22 sales were quicker at around 27M bu.
Internationally, both private and official estimates of Brazil’s safrinha crop continue to move lower. NOAA is predicting a 70% for La Nina development across South America during the upcoming growing season, which should offer support to corn and bean markets.
CFTC Commitments of Traders data for the week ending Aug 24 (futures only) showed that the trade trimmed its net short position to approximately 2.5B bu; large specs trimmed their net long to less than 1.3B 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, with the market also remaining oversold. Weather, early harvest reports, and anticipation of the Sept WASDE report, which will include updated acreage estimates, will likely be major market moving factors over the near-term for corn, beans, and wheat. Harvest pressure is imminent for the corn and soybean markets.
CME Nov soybeans gained 32½ cents last week to finish at 1323¼. Last weekend our proprietary model predicted a finish for the week that was to be near unchanged to lower Vs the previous week’s settlement, which proved to be incorrect.
CME soybeans finished lower on the same factors affecting the corn market and on slower than expected domestic demand.
Domestically, the latest USDA crop condition ratings showed 56% of the crop rated in good, or better, condition, which is off 1 percentage point Vs the previous week. The southern crop has received more beneficial rainfall over the past week, with more to come. As with corn, producers across the upper Midwest will likely see more rainfall this week. Rains should be viewed as mostly positive for aggregate domestic production prospects.
Internationally, a 70% predicted probability for La Nina development across South America during the upcoming growing season should offer support to CME soybean futures, with balance sheets needing sorely to expand during the current marketing year.
Net export sales and shipments were slightly higher Vs the previous assay period at approximately 3M and 10M bu, respectively. Shipments again fell short of the pace required to hit the USDA’s latest projection. The US is 101% committed and 97% shipped Vs the USDA’s target. 2021/22 sales were lower, but strong, at approximately 64M bu.
CFTC Commitments of Traders data for the week ending Aug 24 (futures only) showed that the trade reduced its aggregate net short position to approximately 863M bu; large specs reduced their net long to around 393M bu.
For this week, the weekly technical analysis for and money flow into the Nov contract has remains bearish, with the market remaining somewhat oversold.
CME SRW Sept futures picked up 4¼ cents last week to settle at 732½. Last weekend our proprietary model predicted a finish for the week that was to be near unchanged to higher Vs the previous week’s settlement, which proved correct.
Domestically, US winter wheat harvest is effectively complete, with harvest of the spring crop having commenced. US spring wheat continues to be rated in abysmal condition.
Net export sales were notably lower Vs the previous assay period while shipments were modestly higher at approximately4M and 25M bu, respectively. Sales were off the average weekly pace required to meet the USDA’s official target while shipments were again ahead of the pace requirement. The US is 38% committed and 21% shipped Vs the USDA target. Sales are ahead of the average long-term pace for this point of the season while shipments are near on par with their expected pace.
CFTC Commitments of Traders data for the week ending Aug 24 (futures only) showed that the trade reduced its aggregate net short position to approximately 438M bu while large specs cut their net long to around 42M bu.
For this week, the weekly technical analysis for and money flow into the Dec contract remains bullish. The 700, 650, and 600 levels are downside targets with 775 and 800 likely to evince strong resistance.
Have a great week!
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This post was written by Louis Rose