Rose on Grain – CME Grains Move Lower Despite Late-week Rebound

July 21, 2019 8:46 pm
Published by

Louis W. Rose IV

Corn:

CME Dec corn futures lost 23½ cents on the week to finish at 435¾.  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 proved to be correct.

CME futures moved lower last week on the market’s overbought condition, continued very weak US export business, enhanced estimates of South American production and spec profit-taking.  A heatwave across the upper Mid-west seemed to offer little support to CME futures.

Net export sales and shipments against 2018/19 were lower Vs the previous sales period and remained disappointing, at approximately 8M and 27M bu, respectively.  Both sales and shipments were well off the average weekly pace required to match the USDA’s latest export projection.  The US is 93% committed and 84% shipped Vs the USDA’s most recent target.

Domestically, rain and showers are expected across many US producing regions this week, with the largest rainfall totals expected to be from IN eastward.  Temperatures are expected to cool notably this week.  Friends in IN and OH tell us that this season’s crop is woefully behind schedule. The southern crop remains well behind its average dev elopement pace, with many fields having just begun to silk and tassel in the last 10 days.

Internationally, the safrinha harvest across South America continues to progress, with yield reports propelling production estimates higher.

CFTC Commitments of Traders data for the week ending July 16 (futures only) showed that the trade increased their aggregate net short position to approximately 2.7B bu, while money firms modestly increased their aggregate net long position to around 894M bu.

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 remains supportive to bullish, with the market no longer in an overbought condition.  Market participants will continue to monitor US weather and crop condition ratings while awaiting the USDA’s updated planted acreage estimate on Aug 12.

Soybeans:

CME July soybean futures lost 12¼ cents on the week, settling at 919¼.  Last weekend our proprietary models predicted a finish on the week that would be near unchanged to lower, which proved to be correct.

CME futures moved lower on many of the same factors that affected the corn market; weakening domestic demand also helped Nov soybeans to finish lower.

Net export sales against 2018/19 were very near unchanged Vs the previous assay period while shipments were significantly higher, although still disappointing, at approximately 5M and 33M bu, respectively.  Shipments were again off pace to reach the USDA’s export projection.  The US is 105% committed and 85% shipped Vs the USDA’s target.

Domestically, the latest NOPA crush report showed domestic demand for June well below pre-report projections at around 148.5M bu.  Development of the US crop remains well off its average pace with the overall condition of the crop off notably Vs 2018.  Abatement of the recent heatwave could help the condition of this season’s crop to improve.

Internationally, China continues to buy large quantities of soybeans from South America.  China’s price for embarking on another round of face-to-face talks is steep.  That is, they want the US to remove all restrictions against Huawei and further lift all tariffs currently levied against Chinese imports.  Hence, it seems that renewed negotiations are not likely to take place.  Rather, it seems more likely that additional tariffs against good from China will be imposed

CFTC Commitments of Traders data for the week ending July 16 (futures only) showed that the trade increased its net short position to approximately 352M bu, while managed money firms reduced their net short to approximately 212M bu.  Potential for support via spec short covering remains in the market.

For this week, technical analysis for and money flow into the Nov contract remain supportive to bullish.  Market participants will continue to monitor US weather, crop condition and export sales while awaiting updated S&D projections to be put forth in the Aug WASDE report.

CME Wheat:

CME SRW July futures lost 20½ cents last week, settling at 502½.  Last weekend our proprietary models predicted a finish on the week that would be near unchanged to lower, which also proved to be correct.

CME SRW futures again moved in sympathy with CME corn, enhanced by weakening (and disappointing US export data) and US WW harvest progress.  As with corn, spec profit-taking also likely helped the market finish lower on the week.

Net all wheat sales against 2019/20 were higher Vs the previous sales period while shipments were off noticeably at approximately 11M and 2M bu, respectively.  Both sales and shipments were off the average weekly pace required to meet the USDA’s export projection.

Domestically, the US WW harvest remains behind its rolling 5-year average pace; SW development also remains well of its expected pace.

Internationally, supply concerns persist across Australia, as well as other major world wheat geographies.  Still, new crop balance sheets remain quite loose.

CFTC weekly Commitments of Traders data for the week ending July 16 (futures only) showed that the trade reduced its aggregate net short position to around 444M bu while managed money firms reduced their aggregate net long position to just north of 75M bu.

For this week, the standard weekly technical analysis for and money flow into the Sept contract remain supportive to bullish.  Market participants will continue to monitor domestic and international weather conditions and weekly USDA export data.

Have a great weekend!

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This post was written by Louis Rose