- The Tuesday update from CFTC showed that funds were big sellers in the Ag markets in the week ending Feb 12. Funds sold 29,000 contracts of corn, 16,000 contracts of soybeans, and were sellers of 18,500 contracts of wheat across all three exchanges. In the livestock markets, funds sold 6,900 contracts of hogs and bought 3,600 contracts of cattle. Across the ten principle Ag markets, funds were net sellers of 55,000 contracts, reducing the net length to just 57,000 contracts. The report was as of February 12.
- Soybeans were lower overnight and selling continued on Tuesday. Market news was limited, and traders remain sceptical of a China trade deal, which had the recent weakness in wheat futures pulling soybeans lower. At the close, old crop soybeans were down 8 cents, though May soybeans managed to hold support at the 100-day moving average. Funds were estimated sellers of 9,000 soybean futures.
- The EIA will release the Monthly Biodiesel Production report on Thursday, with data for December. It is typically a slow production month as the year winds down and estimated production margins were not offering a strong production incentive. IA State’s weekly margin estimates showed an average of $0.17/gallon in Dec, down from $0.23 from a year ago and under the summer peak of $0.72. All indications from Washington are that a trade deal with China is close at hand. Such announcement is expected to be viewed as bullish for soybeans and other US commodities.
- Limited news and continued selling in the wheat market pulled corn futures lower through Tuesday. Funds were estimated sellers for Tuesday of 25,000 contracts, for a grand total of 50,000 contracts in the last two days. After the close, the early week Commitment of Traders update showed that for the week ending Feb 12 funds had been net sellers of 29,000 corn contracts. This took their net position to short 15,000 contracts and the first net short holdings since early December. May corn futures have held an approximate range of just $0.20 ($3.75-3.95) over the last five months. Tuesday’s close was back at the bottom of the range and could draw additional selling later this week. But with the odds steadily increasing that a China trade deal could be announced, it is tough to be bearish. Any export demand from China is not in the USDA balance sheet and would further tighten US stocks.
- Chicago and KC wheat contracts fell to new contract lows as funds added to their shorts by another 7,000 contracts. Chicago closed at $4.60 after falling to a ten-month low on the continuation chart. There is support at $4.60 but $4.40 is a tempting technical target. Minneapolis wheat gained a cent. The relative strength in Minneapolis could be due to intermarket spreading and concern that spring wheat seedings will be down due to wet soils and cool temperatures. Last Friday, USDA updated export sales with a whopping 3.57 million mt (vs. expectations of 2-3 million). Export commitments as of mid-Feb are 800 million bu vs 808 million a year ago. USDA pegged next year’s stocks at 944 million bu vs this year’s 1,010 million. Other than the very long wait for signs of strong US wheat exports, most other global fundamentals are supportive. However, technical algos seem to be in the driver’s seat. We can’t find a strong fundamental case to sell wheat at these price levels.