Rose on Grain – CME Grains Finish Week Near Unchanged, Quarterly Stocks Report Looms

September 29, 2019 5:09 pm
Published by

Louis W Rose IV

Corn:

 CME Dec corn futures picked up ¾ cent on the week to finish at 371½.  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 was correct.

CME futures finished near unchanged on continued slowing of ethanol production, continued weakness in US export data and strengthening US currency, all of which was mitigated by frost concerns for the domestic crop, drought across South America and perceived friendliness ahead of upcoming US – China trade talks.

Net export sales and shipments were lower Vs the previous sales period at approximately 19M and 11M bu, respectively. Both sales and shipments were well off the average weekly pace required to match the USDA’s export projection. The US is 18% committed and 2% shipped Vs the USDA target of nearly 2.1B bu.

Domestically, recent rains across the upper Mid-west continue to hinder crop maturity and harvest progress; the crop across the southern US is all but complete.  There is now concern regarding yield losses due to frost across the upper and western Plains.  Ethanol production continues to slow.

Internationally, cost of production figures out of Argentina favor soybean sowing Vs corn ahead of planting season as droughty conditions continue to plague Brazil, Argentina and Paraguay.  Still, potential for spotty drought relief across South America is expected this week.

CFTC Commitments of Traders data for the week ending Sept 24 (futures only) showed that the trade reduced their aggregate net short position to around 866M bu while large specs trimmed their aggregate net short position to approximately 813M bu.  Potential for upward movement, via spec short covering, remains in the market.

For an in-depth analysis of CFCT data see our weekly CFTC analysis and commentary.

For this week, the standard technical analysis for the Dec contract remain bearish while money flow has turned mildly supportive.  Market participants will continue to monitor US weather, harvest progress, yield reports and US export and ethanol data.  News and rumors concerning US – China trade talks could also significantly influence the market.  USDA’s quarterly stocks report will be closely scrutinized for corn, soybeans and wheat.

Soybeans:

CME Nov soybeans gave up ¼ cents to settle at 883.  Last weekend our proprietary models predicted a finish on the week that would be near unchanged to higher, which proved to be correct.

CME futures finished near unchanged on most of the same factors affecting the corn market, bu private reports out of China relaying that the central government has issued tariff waivers against US soybeans up to 110M bu provided stronger support for CME soybeans.

Net export sales were lower Vs the previous assay period, while shipments were higher at approximately 38M and 35M bu, respectively.  Both sales and shipments were on the average weekly pace required to match the USDA’s export projection.  The US is 25% committed and 4% shipped Vs the USDA’s target.

Domestically, as with corn, heavy rains are expected across the upper Mid-west this week while mostly hot and dry conditions are expected across the southern US.  Record high temperatures and very dry conditions across the southern states have reduced yield potential, especially for late-sown or double-cropped beans, but the damage is more pronounced across the northern one half of the region.  A drive through Mississippi on Thursday showed that this season’s harvest is rapidly progressing, with early sown beans likely to produce decent to relatively strong yields.

Hot and dry conditions across South America (especially Brazil) continue to delay new crop sowing.  Potential for spotty drought relief across Brazil, Argentina and Paraguay this week is expected to miss most of South America’s major producing regions.

CFTC Commitments of Traders data for the week ending Sept 24 (futures only) showed that the trade increased its net short position to approximately 410M bu, while managed money firms trimmed their net short to around 215M bu.  Potential upward improvement via spec short covering remains in the market.

For this week, the weekly technical analysis for the Nov contract remains bearish while money flow is turning supportive.  Market participants will continue to monitor US weather, harvest progress and yield reports, export sales data and news relating to US – China trade relations.

CME Wheat:

CME SRW Dec futures picked 3 cents last week, settling at 487¼.  Last weekend our proprietary models predicted a finish on the week that would be near unchanged to higher, which proved to be correct.

CME SRW futures again seemed to trade in sympathy with the directionless trade of CME corn, especially with little significant wheat-specific news being made known to the market.

Net all wheat sales and shipments were slightly lower Vs the previous sales period at approximately 10M and 18M bu, respectively. Sales were off the average weekly pace required to meet the USDA’s export projection while shipments were nearly hit the pace requirement. The US is 47% committed and 30% shipped Vs the USDA projection.

Domestically, the thrust of WW sowing season is underway, with progress near the rolling 5-year average pace.  Recent rains across the southern Plains and portions of the OH river valley will likely ultimately prove positive for seedling emergence and development.  Quality concerns regarding the SW crop continue to mount as rains continue to hinder harvest operations.

Internationally, the drought Down Under continues to worsen, with further debits to official estimates of production likely forthcoming.  Strengthening US currency seems likely to cool US export business.

CFTC weekly Commitments of Traders data for the week ending Sept 24 (futures only) showed that the trade noticeably increased its aggregate net short position to around 257M bu while managed money firms increased their net short to approximately 77M bu.  Potential for a modest short covering rally exists.

For this week, the standard technical analysis for the Dec contract remains bearish while money flow is turning positive.  Market participants will continue to monitor domestic and international weather conditions, weekly USDA export data and crop progress reports as WW planting progresses.

Have a great week!

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This post was written by Louis Rose