Rose on Grain – Corn and Soybeans Finish Lower on Week, Wheat Surges

July 14, 2020 12:12 pm
Published by

Louis W. Rose IV

Corn:

CME Dec corn futures lost 8¼ cents last week to finish at 336½.  Our proprietary model (timely predictions available in our complete weekly report) called for a finish on the week that was to be near unchanged to higher Vs the previous Friday’s settlement, which proved to be incorrect.  However, we did not add any fresh long positions ahead of the WASDE report’s release.

The corn market finished lower on the week, essentially, on an overall bearish picture painted within the USDA’s July WASDE report release.

In its July WASDE report, USDA lowered its domestic carryout projection, which was expected, to around 2.65B bu.  Still, this is a bearish figure.  World aggregate ending stocks for 2020/21 was projected nearly 2% lower Vs June, but the carryout forecast remains bearish.

Domestically, the condition of this season’s crop remains strong, but has retreated recently on abnormally high temperatures across many major production areas.  Still, rain and showers are expected across most major US producing regions this week.  Corn producing areas within the southern US (outside of eastern coastal areas) are not likely to see significant rainfall this week and high temperatures are not positive for this year’s late southern crop.

Net export sales were higher Vs the previous sales period while shipments were lower at approximately 24M and 43M bu, respectively. Sales were ahead of the weekly pace required to match the USDA’s export projection while shipments were off the requirement pace. The US is 95% committed and 78% shipped Vs the USDA’s target.

Internationally, the safrinha harvest across Brazil has gotten underway with most estimates of yield and production moving lower.  Conab modestly debited its production forecast for this season in its July crop survey report.

CFTC Commitments of Traders data for the week ending July 7 (futures only) showed that the trade held an aggregate net short position of approximately 296M bu while large specs trimmed their aggregate net short position to around 750M bu.  Still, potential for a sharp spike or rally at the hands of 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 weekly technical analysis for and money flow into the Dec contract are supportive, with the market no longer in overbought territory.  Weather reports, crop condition ratings and pandemic concerns and, of course, the USDA’s July WASDE report will likely be major market-moving factors for corn and soybeans this week.

Soybeans:

CME Nov soybeans lost 6½ cents last week, finishing at 890¾.  Our proprietary model called for a finish on the week that was to be near unchanged to higher Vs the previous Friday’s settlement, which proved to be incorrect.  Still, we elected to remain short ahead of the annual July WASDE report.

CME soybeans were lower on a neutral to somewhat bearish July WASDE report and on weakening US export business.  USDA projected world aggregate carryout for 2020/21 1% lower Vs June.

In its July WASDE report, USDA projected domestic carryout at 425M bu Vs the market’s pre-report expectation of 416M, which was expected, to around 2.65B bu.  Still, this is a bearish figure.  World aggregate ending stocks for 2020/21 was projected nearly 2% lower Vs June, but the carryout forecast remains bearish.

Domestically, as with corn, the condition of this season’s crop remains strong, but it has retreated recently on abnormally high temperatures across many areas.  Rain and showers are expected across most major US producing regions this week.  However, soybean producing areas within the southern US (outside of eastern coastal areas) are not likely to see significant rainfall this week.

Net export sales and shipments were higher (sales noticeably so) Vs the previous assay period at approximately 35M and 17M bu, respectively. Sales remained ahead well ahead of the average weekly pace required to match the USDA’s export projection while shipments were well off the pace requirement. The US is 102% committed and 84% shipped Vs the USDA’s target.

Internationally, it continues to look as if Brazil will produce a significantly larger crop in 2020/21 than it did in 2019/20, weather permitting.  Conab modestly increased its production target in this month’s crop survey report.

CFTC Commitments of Traders data for the week ending July 7 (futures only) showed that the trade held an aggregate net short position of approximately 1.36B bu while large specs increased their aggregate net long position to just north 453M bu.

For this week, the weekly technical analysis for and money flow into the Nov contract remain bullish, but the market has moved away from an overbought condition.

CME Wheat:

CME SRW Sept futures gained 42 cents on the week to settle at 534.  Our proprietary model called for a finish on the week that was to be near unchanged to higher Vs the previous Friday’s settlement, which proved correct.  And, we traded this bias ahead of the WASDE report’s release.

CME SRW futures were notably higher on the week as specs continued to cover their aggregate net short position.  Relatively weak US export data seemingly did little to apply drag to the market.

In its July WASDE report, USDA enhanced its domestic carryout projection 2% Vs June on lower expectations for domestic offtake.  World aggregate ending stocks for 2020/21 were projected modestly lower Vs the June forecast.

Domestically, US harvest progress continues to move forward, but weather conditions this week seem likely to hinder remaining harvest operations.

Net all wheat sales and shipments were lower Vs the previous sales period at approximately 12M and 15M bu, respectively. Both sales and shipments were off the average weekly pace required to meet the USDA’s export projection. The US is 29% committed and 9% shipped Vs the USDA’s projection.

Internationally, evidence continues to mount regarding lower than originally expected production across the EU this season.  Concerns remain regarding Russian production and potential export restrictions on this season’s crop.

CFTC Commitments of Traders data for the week ending July 7 (futures only) showed that the trade held an aggregate net short position of approximately 313M bu while large specs held an aggregate net short position of around 162M bu.  Potential for a sharp spike or rally at the hands of spec short covering remains in the market.

For this week, the weekly technical analysis for and money flow into the Sept contract remains turned supportive.  It continues to look as if CME wheat is likely to find staunch resistance near recent highs on up to around 550.

Have a great week!

Subscribe to be notified when this post is updated!

---

This Market Report constitutes copyrighted material and may not be reproduced in any manner, either in part or in whole, without prior written consent from Rose Commodity Group. However, redistribution via forwarding of the full link to the report is permitted. Quotations (limit 3) from the report are permitted, so long as they are accompanied by attribution to Rose Commodity Group and a link to the full report.

---

This publication is presented for informational purposes only. While the information contained herein is believed to be accurate and factual, the possibility of error exists. Commodity trading is an inherently risky proposition and there is no guarantee that trades based on the information enclosed herein will result in profitable outcomes.

This post was written by Louis Rose