- The Commitment of Traders report showed another week of shifting sentiment. Funds were net sellers through the week in the wheat market, selling close 18,000 contracts across all three exchanges. Funds were still net long in Kansas, and added to net short positions in Chicago and Minneapolis. Funds were big buyers in livestock, corn, and in all three of the soy markets. Across the ten key Ag markets funds were net buyers through the week of more than 105,000 contracts and were net back to net long of just over 6,400 contracts.
- Soybeans saw selling right from the morning open, but the early break found strong demand that carried the market higher into the end of the day. At the close, November soybeans were back over the 50-day moving average and marked the best close in seven weeks. The Commitment of Traders report showed that funds covered more than 14,000 contracts last week, and their net short position of just over 44,000 is now the smallest in six weeks. In soymeal, funds added 5,000 contracts to their net long position now worth 26,000 contracts. But funds largest shift was in soyoil where they covered more than 34,000 contracts. US farmers have pushed hard ahead of rains that have brought harvest to a standstill across much of the Midwest. But after an active week we look for harvest progress through Sunday to have reached 38-41% complete. Soybeans ended the week with a rally, but we look for trading to slow in the first half of next week ahead of the Oct crop report. Nov beans have resistance near $8.85.
- Dec corn ended flat, and again the market tried and failed to trade through its 50-day moving average. Price were weak at midday on chart-based selling, but recall seasonal trends and export demand remain positive. Otherwise, fresh news is lacking. Managed funds on Tuesday were short a net 57,000 contracts, fewer than expected. The trade does seem to react to fund position on Sun/Mon, but such a position is not viewed as market changing. Corn still appears cheap, and a scramble for supply is expected in the weeks ahead. Excessive US rainfall will at the least slow down the filling of the pipeline. The autumn/early winter program will be record/near record large. Even amid an Oct yield of 181-182 bushels/acre, fair value is seen between $3.70-3.90, Dec. Note that there is renewed uncertainty over Ukrainian yields. A USDA attaché report pegged Ukrainian production at 29.5 million mt, vs. USDA’s official number of 31 million. It is a small difference, but following severe loss in Russia, Black Sea corn trade could be disrupted further.
- World wheat futures again ended steady to higher, with Russian interior prices also rising across the Siberian spring wheat belt. Like corn and beans, the market is concerned about coming US rainfall, which will be most excessive across the HRW Belt. There is ample time remaining to seed winter wheat, but accumulation of 5-10” across TX, OK and E KS will halt fieldwork for at least two weeks. Elsewhere, dryness continues across Australia, Europe and the Black Sea region into the second half of October. Part of our thesis in wheat is that a substantial rise in acres and favorable weather are needed to boost major exporter supplies in 2019/20. This is now less certain given N Hemisphere weather issues. Managed funds on Tuesday were short a net 12,000 contracts in Chicago (larger than expected) and long a net 28,000 contracts in Kansas. This compares to length in Kansas of 64,000 contracts in late August, and fund length is now far from excessive. We maintain a slow but steady rally unfolds into late year. Aussie supply & demand will be key in next week’s WASDE.
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IAG Europe Grains Update 5 October 2018
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