Rose on Grain – Corn, Wheat and Beans Finish with Modest Weekly Changes, US – China Tensions Running High

July 26, 2020 11:07 pm
Published by

Louis W. Rose IV

Corn:

CME Dec corn futures lost 4¾ cents last week to finish at 335.  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 lower Vs the previous Friday’s settlement, which proved to be correct.

The corn market finished lower on the week on worsening US export data, enhanced Wuhan pandemic concerns and increased nervousness regarding US – China relations.  Weakness in US currency may have helped to mitigate weekly losses.

Domestically, the condition of this season’s crop remains strong as timely rains have helped the crop develop ahead of its normal schedule.  Significant rainfall is again expected across most major US producing regions this week.  Too, corn producing areas within the southern US are likely to see significant rainfall over the coming week.  Across the deep south, harvest season is quickly approaching.

Net export sales were notably lower Vs the previous sales period while shipments were higher at approximately 9M and 41M bu, respectively.  Both sales and shipments were off the weekly pace required to match the USDA’s export projection.  The US is 97% committed and 82% shipped Vs the USDA’s target.

Internationally, the safrinha harvest across Brazil has continues to move forward amid dry conditions with most estimates of yield and production moving lower.  However, private estimates of 2020/21 production are moving higher, some to record levels.  Export quotes are firmer in Brazil Vs Us gulf quotes.  China continues to sell around 100% of the corn it offers at its reserve auction.  The largest news on the week was, of course, the US-ordered closing of the Chinese consulate in Houston.

CFTC Commitments of Traders data for the week ending July 21 (futures only) showed that the trade trimmed its aggregate net short position to approximately 334M bu while large specs increased their aggregate net short position to around 778M bu.  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 bearish.  Weather reports, news regarding US – China relations and pandemic concerns will likely be major market-moving factors for corn and soybeans this week.  Overall, a strengthening supply side of the S&D equation hardly seems supportive for CME futures.

Soybeans:

CME Nov soybeans picked up 4¼ cents last week, finishing at 899¼.  Our proprietary model called for a finish on the week that was to be near unchanged to lower Vs the previous Friday’s settlement, which proved to be correct, depending on one’s definition of “near unchanged”.

CME soybeans were near unchanged on a continued mostly favorable outlook for this season’s US production and reported increased producer selling above the 900 level, base Nov.   Weakening US currency may have lent some support to the market while US – China tensions seemed to be largely ignored by market participants as China continued to purchase US beans.

Domestically, as with corn, the condition of this season’s crop remains strong, with development, on average, proceeded at a faster than normal pace.  Also (as with corn) significant rainfall is expected across most major US producing regions this week, including across producing areas within the southern US.

Net export sales were slightly higher Vs the previous assay period while shipments were lower at approximately 13M and 17M bu, respectively.  Sales met the average weekly pace required to match the USDA’s export projection while shipments were again well off the pace requirement.  The US is 104% committed and 86% shipped Vs the USDA’s target.

Internationally, business and rumors of business from China continue to be reported, which is supportive.  However, US - China tensions have escalated over the past week and the market could reflect such this week.

CFTC Commitments of Traders data for the week ending July 21 (futures only) showed that the trade trimmed their aggregate net short position to approximately 1.21B bu while large specs increased their aggregate net long position to almost 366M bu.

For this week, the weekly technical analysis for and money flow into the Nov contract are bullish with the market now approaching an overbought condition.

CME Wheat:

CME SRW Sept futures picked up 4¾ on the week to settle at 539½.  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.

CME SRW futures were notably higher on the week as specs finished covering their aggregate net short position, flipping it to a modest net long.  Decent US export data and a significant weakening of US currency also likely lent significant support to the market.

Domestically, US harvest progress continues to move forward, but weather conditions have slowed the finish of the season and rains this week seem likely to further hinder remaining harvest operations.  The current rally in wheat futures seems likely to entice increased area committed to wheat this fall.

Net all wheat sales and shipments were lower Vs the previous sales period at approximately 23M and 19M bu, respectively.  Both sales and shipments were ahead of the average weekly pace required to meet the USDA’s export projection.  The US is 35% committed and 13% shipped Vs the USDA’s projection.

Internationally, evidence continues to mount regarding lower than originally expected production across the EU this season as harvest operations progress.  Concerns remain regarding this season’s Black Sea area production (especially Ukraine); potential export restrictions on this season’s Russian crop are feared.

CFTC Commitments of Traders data for the week ending July 21 (futures only) showed that the trade reduced their aggregate net short position to approximately 402M bu while large specs flipped their aggregate net short position to a modest net long of around 13M bu.

For this week, the weekly technical analysis for the Sept contract has turned bullish while money flow remains less than supportive.  It continues to look as if CME wheat is likely to find staunch resistance near 550.

Have a great week!

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This post was written by Louis Rose