Rose on Grain – CME Grains Settle Down After Initial War Shock

March 14, 2022 5:05 pm
Published by

Louis W. Rose IV

Corn:

CME May corn futures gained 8¼ cents last week to finish at 762½.  We did not recommend trading any bias last week for corn, soybeans, or wheat due to the mid-week release of the Mar WASDE report.  Corn futures have begun the new week significantly lower.

The corn market finished slightly higher on strong US export data and significant tightening of the USDA’s domestic balance sheet.

Domestically, trader attentions remain split between 2022 acreage, domestic offtake and strong export demand, and the military conflict in Ukraine.  Planting is likely to begin shortly across the mid- and southern Mississippi River Delta.  Further, corn remains in a fierce acreage battle with soybeans for 2022 acreage, with soybeans gaining favor due to dramatically lower input costs.

In its Mar WASDE report, the USDA cut its carryout estimate for 2021/22 5% Vs Feb to approximately 1.44B bu.  Aggregate world carryout for 2021/22 was projected slightly lower Vs Feb at 11.85B bu.

Net export sales and shipments were higher Vs the previous sales period at approximately 84M and 69M bu, respectively.  Both sales and shipments were well ahead of the pace required to meet the USDA’s upwardly revised projection.  The US is 79% committed and 43% shipped Vs the USDA’s target.  Sales are well ahead the average expected pace for this point of the season; shipments are modestly off their expected pace.

Internationally, the war in Ukraine continues to support the corn market, with some now expecting that a significant amount of planned area committed to the crop will not be planted.  Official estimates of this season’s South American crop were little changed Vs Feb.

CFTC Commitments of Traders data for the week Mar 8 (futures only) showed that the trade slightly increased its net short position Vs the previous assay period to approximately 3.83B bu while large specs modestly increased their net long to around 1.78B 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 May contract remain bullish, with the market also remaining overbought.  Export data, geopolitical concerns, and forerunning of the annual Planting Intentions Report seem likely to be major market moving factors for corn, wheat, and beans over the near-term.

Soybeans:

CME May soybeans gained 15½ cents last week to finish at 1676.  All CME soybean contracts have commenced the new week near unchanged.

CME soybeans finished higher in sympathy with other grains and Ags, a tightening of both domestic and aggregate world official balance sheets, and another round of strong US export data.

Domestically, as with corn, current prices keep beans competitive with cotton for southern acreage.  Continued strength in both cotton and corn seems likely to be supportive for CME soybeans over the near-term.

In its Mar WASDE report, the USDA reduced its 2021/22 domestic carryout projection 12% Vs the previous report to approximately 286M bu, which is incredibly bullish.  Aggregate world carryout for 2021/22 was forecast 3% lower at around 3.3B bu, with most downward adjustments coming from South America.

Net export sales and shipments were higher Vs the previous assay period at approximately 81M and 31M bu, respectively.  Sales and shipments were again well ahead of the pace required to meet the USDA’s upwardly revised projection.  The US is 92% committed and 73% shipped Vs the USDA’s target.  Sales are notably ahead the average expected pace for this point of the season; shipments are on par with the expected pace.

Internationally, official estimates from across South America continue to show an expectation for a smaller than originally expected crop. 

CFTC Commitments of Traders data for the week ending Mar 8 (futures only) showed that the trade slightly increased its aggregate net short position to approximately 1.67B bu while large specs reduced their net long to around 808M bu.

For this week, the weekly technical analysis for and money flow into the May contract remain bullish, with the market remaining notably overbought territory.

CME Wheat:

CME SRW Mar futures lost $1.02½ last week at 1106½.  Chicago wheat has commenced the new week near unchanged.

CME futures finished lower, mostly, on a correction of last week’s gargantuan gains.  That is, most of the short covering that helped to inspire CME wheat to record highs was completed last week; profit-taking on long positions also likely applied drag to the market as did loosening USDA S&D balance sheets.

Domestically, dryness across much of the Great Plains continues to cause concern for 2022 production; much of this season’s crop across the region will likely be abandoned.  There is no relief in sight from the drought within the near- to medium-term weather forecasts.

In its Mar WASDE report, the USDA projected 2021/22 domestic carryout 1% higher Vs the previous report at around 653M bu; the adjustment mostly came per another lowering of USDA’s export projection.  Aggregate world carryout for 2021/22 was also projected 1% higher at around 10.34B bu.

Net export sales and shipments were slightly higher Vs the previous assay period at approximately 11M and 14M bu, respectively.  Sales were ahead of the average weekly pace required to meet the USDA’s official target while shipments were well off the pace requirement.  The US is 85% committed and 67% shipped Vs the USDA’s target.  Sales are modestly ahead of the average long-term pace for this point of the season while shipments are significantly off their expected pace.  SRW sales were lower at less than 500K bu.

Internationally, despite last week’s retracement, the war in Ukraine continues to remind all market participants of just how integral the Black Sea region is to world wheat use.

CFTC Commitments of Traders data for the week ending Mar 8 (futures only) showed that the trade increased its aggregate net short position to approximately 470M bu while large specs flipped their aggregate net short to a significant net long of around 109M bu.

For this week, the weekly technical analysis for and money flow into the May contract remain bullish, with the market no longer overbought.

Have a great week!

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    This post was written by Louis Rose