- The end of week Commitment of Traders update confirmed massive selling across Ag markets for the week ending Feb 19. Funds covered small amounts of their net short positions in hogs and feeder cattle and added 4,500 contracts to their sizable live cattle position. Funds sold 72,000 contracts of corn, 33,000 in soybeans, and a combined 33,000 contracts of wheat in Chicago and KS. Across the ten principle Ag markets, funds sold 125,000 contracts and were net short for the first time since November, of 125,000 contracts.
- Soybeans fell sharply from the morning open on Friday, marking a three month low at midday and then rallying back to close 1-2 cents higher. In the product markets, soymeal fell to new contract lows and then rallied back to close higher, and soyoil was barely lower. Market news remained limited at the end of the week, but funds were early sellers on technical considerations and limited news from Chinese trade talks. After the close, the USDA confirmed a record large January soybean crush rate of 183 million bu.
- The Commitment of Traders report showed that for the week ending Feb 19, funds were net short 43,000 soybean contracts (33,000), were net short 40,000 soymeal contracts (-10,000) and were net long 30,000 contracts in soyoil (-5,000). Much of the short soybean position was established from $9.20-9.30. A push back into this area is likely to trigger fund short covering and technical buying, Chicago soybeans are caught in a waiting game, waiting on news from China. The Mar WASDE will be released next Friday with Perspective Plantings at the end of the month.
- The May corn contract closed up 2 cents after setting a new 5-month low. Funds increased their net short position by 70,500 contracts as of the week ending Feb 19. Funds were net short 116,000 contracts. There were nearly 2,000 contracts delivered against the Mar contract. Weather has generally been favourable for the developing S American crops and new lows in wheat have weighed on corn.
- Yesterday, USDA reported that US old-crop export sales rose nearly 50 million bu, above the high end of the range of expectations. As of late February, US corn export commitments were 1,583 million bu, 9 million more than a year ago. To date, commitments have accounted for 65% of the USDA’s projection of a record 2,450 million bu. On average, as of this date, commitments account for 69% of annual exports. The chart plots commitments as of late February against annual exports. This year’s commitments have fallen short of the average expected pace needed to meet the USDA’s projection. However, there is still another 6 months left in the marketing year and global import demand is record large. Finally, there’s the possibility that China may buy US corn as part of trade agreement.
- Chicago May wheat lost 2 cents and set a new contract low at $4.47. On the continuation chart, CME futures fell to a 55-week low. However, the KC May contract rose a cent, but Minneapolis settled down 2 cents. The Matif May contract lost the equivalent of 7 cents and closed at a new 7-month low. Specs increased their net short position in CME wheat by nearly 31,000 contracts as of the week ending Feb 19. Funds were net short nearly 75,000 CME contracts and short 35,000 KC contracts. There were 577 contracts delivered against the CME contract (vs. 400 yesterday), but there were no deliveries against the KC or Minneapolis contracts.
- In a search for reasons to explain why wheat has fallen so sharply, several articles have cited “ample” exportable supplies. While it is true that some exporters have wheat in store (most notably the US), the projected ending stocks of all major exporters are at a historic low. Based on USDA’s Feb WASDE, exporters stocks (expressed as a percent of global trade) is 34.5% down sharply from last year’s 42.7%. We believe that consumers need to be buyers below $4.60 basis May Chicago; today’s close was $4.57!
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