Louis W. Rose IV
CME Dec corn futures gained 13¼ cents on the week to finish at 384¾. 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 was incorrect.
CME futures moved higher, mostly, on lower than expected USDA quarterly stocks, which should translate into lower projected carryout for 2018/19 in this week’s WASDE report. Improving US export data, slow harvest operations across most world production areas and dry conditions across South America also likely helped CME corn move higher.
Net export sales and shipments were higher Vs the previous sales period at approximately 22M and 18M bu, respectively. However, both sales and shipments remained well off the average weekly pace required to match the USDA’s export projection. The US is 19% committed and 3% shipped Vs the USDA target.
Domestically, rains across major US producing regions continue to hinder crop maturity and harvest progress. Concerns persist regarding yield losses due to frost and late season precipitation across the upper and western plains. More rain is expected across the Mid-west this week.
Internationally, cost of production figures out of Argentina continue to favor soybean sowing Vs corn ahead of planting season as droughty conditions continue to plague Brazil, Argentina and Paraguay. Harvest progress across the northern hemisphere remains well off its average seasonal pace.
CFTC Commitments of Traders data for the week ending Oct 1 (futures only) showed that the trade increased their aggregate net short position to more than 1B bu while large specs reduced their aggregate net short position to approximately 640M bu. Potential for upward movement, via 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 standard technical analysis for and money flow into the Dec contract are supportive to bullish. Market participants will continue to monitor US weather, harvest progress, yield reports and US export and ethanol data. News and rumors concerning US – China trade talks could also significantly influence the market. Still, the WASDE report, scheduled for release at noon on Oct 10 likely holds the greatest potential for moving the market further.
CME Nov soybeans gained 33¼ cents to settle at 916¼. Last weekend our proprietary models predicted a finish on the week that would be near unchanged to higher, which again proved to be correct.
CME futures finished higher on most of the on the same factor that affected CME corn, with USDA quarterly stocks and export sales data and optimism ahead of this week’s US – Chinese trade talks creating a very friendly atmosphere for the soybean market. Purchases of US soybeans my China further bolstered the market.
Net export sales were higher Vs the previous assay period, while shipments were lower at approximately 76M and 34M bu, respectively. Sales were ahead of the average weekly pace required to match the USDA’s export projection while shipments were just short of the pace requirement. The US is 30% committed and 6% shipped Vs the USDA target.
Domestically, as with corn, rains are again expected across the upper Mid-west this week while cooler temperatures and showers are expected across the southern US. Weather across the Mid-west has kept maturation and harvest of the US crop well off its average pace.
Hot and dry conditions across South America (especially Brazil) continue to delay new crop sowing. China will return to Washington on Oct 10 for trade talks; President Trump has expressed optimism regarding negotiations while most traders seem skeptical.
CFTC Commitments of Traders data for the week ending Oct 1 (futures only) showed that the trade slashed its net short position to approximately 129M bu, while managed money firms notice4ably reduced their net short to around 54M bu. Modest potential for upward improvement via spec short covering likely remains in the market.
For this week, the weekly technical analysis for and money flow into the Nov contract is supportive to bullish. Market participants will continue to monitor US weather, harvest progress and yield reports, export sales data. However, news relating to US – China trade relations and the Oct WASDE report seem to hold the greatest potential for market movement this week.
CME SRW Dec futures picked up 3¼ cents last week, settling at 490½. Last weekend our proprietary models predicted a finish on the week that would be near unchanged to higher, which again proved to be correct.
CME SRW futures again seemed to trade in sympathy with CME corn, but with less fervor, especially with US sowing of WW near the expected pace.
Net all wheat sales and shipments were modestly higher Vs the previous sales period at approximately 12M and 21M bu, respectively. Sales were again off the average weekly pace required to meet the USDA’s export projection while shipments exceeded the pace requirement. The US is 49% committed and 32% shipped Vs the USDA projection.
Domestically, the thrust of WW sowing season is underway, with progress remaining near the rolling 5-year average pace. Rains across the southern Plains and portions of the OH river valley will likely ultimately prove positive for seedling emergence and development. More rain and showers are expected this week.
Internationally, the drought Down Under continues to worsen, with further debits to official estimates of production likely forthcoming. Too, China’s recent purchases of Us wheat is encouraging.
CFTC weekly Commitments of Traders data for the week ending Oct 1 (futures only) showed that the trade trimmed its aggregate net short position to around 243M bu while managed money firms slightly increased their net short to approximately 80M bu. Potential for a modest short covering rally remains in the market.
For this week, the standard technical analysis for the Dec contract is effectively neutral while money flow remains positive. Market participants will continue to monitor domestic and international weather conditions, weekly USDA export data and crop progress reports as WW planting progresses. We expect that the Oct WASDE report will prove to be taken as mostly neutral.
Have a great week!
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This post was written by Louis Rose