Rose on Grain – CME Grains Stop Bleeding, Finish Higher on Week
Louis W. Rose IV
Corn:
CME Dec corn futures gained 55¾ cents last week, finishing at 620. We did not recommend a trading bias for corn, wheat, or beans. The Dec contract has commenced the new week significantly lower.
The corn market finished higher last week on fresh spec buying, potentially due to the market’s oversold condition, improved US export data, and flooding across portions of major Us producing areas.
Domestically, the condition of the overall US crop has improved; one of our partners called in from Ames, IA this week to report that both the corn and soybeans crops across the area appeared to be mostly in very fine condition. Still, the crop remains a bit off its expected development pace. Some flooding across the Midwest last week caused concerns, but, historically, such events are often associated with improved production potential across larger areas, as flooding tends to be localized. Regarding the southern US crop, production will be smaller this season (with the harvest about to commence, due to lower planted area and, particularly, extremely hot conditions across the southern states this season.
Net export sales were higher while shipments were lower Vs the previous sales period at approximately 6M and 34M bu, respectively. Both sales and shipments were off the pace required to meet the USDA’s projection. The US is 99% committed and 91% shipped Vs the USDA’s target. Sales are well ahead the average expected pace for this point of the season; shipments are also ahead of their expected pace.
Internationally, the market’s recent collapse was, at least in part, due to agreements to allow grain exports out of Ukraine. The market will soon become focused on early sowing of the new crop across South America.
CFTC Commitments of Traders data for the week July 26 (futures only) showed that the trade reduced its net short position Vs the previous assay period to approximately 1.95B bu while large specs increased their net long to around 559M bu.
For this week, the weekly technical analysis for and money flow into the Dec contract remain bearish with the market also remaining oversold. Weekly USDA export data, weather and crop reports, and forerunning of the USDA’s Aug WASDE report are major factors this week for corn, wheat, and beans.
Soybeans:
CME Nov soybeans gained 152¾ cents last week, finishing at 1468½. Nov has commenced the new week sharply lower, with US – China tensions an especially pertinent factor for the bean market.
CME soybeans finished higher, despite poor US export data, on fresh spec buying amid the market’s oversold condition and notable trade short covering amid a very tight US balance sheet.
Domestically, as with corn, the overall condition of the US crop has shown improvement, but the crop remains behind schedule with respect to development. Also as with corn, recent flood event shave caused market jitters. This season’s southern crop has greater rebound potential than does corn, especially with recent rains, but average yields will likely be off medium-term averages.
Net export sales and shipments were lower Vs the previous assay period at approximately (2M) and 15M bu, respectively. Sales met the pace required to meet the USDA’s projection while shipments did not. The US is 102% committed and 92% shipped Vs the USDA’s revised target. Sales are notably ahead the average expected pace for this point of the season; shipments are off slightly regarding expected pace.
Internationally, planting season across portions of South America is rapidly approaching – and futures markets will soon be assaying pre-season planting conditions. Overall, South American production for this season seems likely to be proven lower than current USDA estimates.
CFTC Commitments of Traders data for the week ending July 26 (futures only) showed that the trade reduced its aggregate net short position Vs the previous assay period to approximately 744M bu while large specs increased their net long to almost 425M bu.
For this week, the weekly technical analysis for and money flow into the Nov contract remain bearish.
CME Wheat:
CME SRW Sept futures gained 48¾ cents last week at 807¾. Sept has commenced the new week lower, possibly due to US – China tensions affecting outside markets amid a potential visit to Taiwan by House Speaker Pelosi.
CME wheat finished higher, despite weakening US export data, on likely late-week short covering spurred on by some flooding across SRW producing areas with wheat still standing in fields. Outside market action in other Ags also likely support CME wheat.
Domestically, the US WW wheat harvest is nearing completion, and, overall, it has been disappointing – especially with regards to HRW. The SW crop is heading at a slower pace than last season, with overall condition significantly off last year’s figures. Some SRW areas have received far too much recent rainfall.
Internationally, agreements which allow grain exports out of Ukraine amid ongoing Russian aggression have greatly tempered wheat market bullishness.
CFTC Commitments of Traders data for the week ending July 26 (futures only) showed that the trade reduced its aggregate net short position to approximately 254M bu while large specs increased their aggregate net short to around 73M bu.
For this week, the weekly technical analysis for and money flow into the Sept contract remain bearish, with the market also remaining oversold.
Have a great week!
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This post was written by Louis Rose