- The Commitment of Traders data showed that funds added to their net short Ag position last week, selling 29,701 contracts across the ten principle Ag markets. Once again, most of that selling was primarily in corn, where funds sold nearly 25,000 contracts. Across the other 9 markets, funds were net sellers of just 4,750 contracts. Funds were sellers in soybeans, soyoil, KC wheat, MN wheat, and Feeder Cattle, and were buyers in soymeal, Chi wheat, hogs and cattle.
- Soybeans were on both sides of unchanged through Friday’s trade and marked gains of 3-4 cents on a late day rally. Soy product markets were sharply mixed, with meal closing lower while soyoil closed out the week on the daily/weekly highs. Soy crush spreads were 3-4 cents lower for Friday and were down sharply for the week, with August marking a weekly loss of more than 26 cents. The weekly Commitment of Traders report showed that funds were net short 58,400 contracts in soybeans (-5,150), net long 53,380 contracts in soymeal (+2,050), and net short 90,210 contracts in soyoil (-4,850). Funds are reluctant to give up on their meal position. Increased Chinese trade rhetoric from both China and the US seemed to have little effect on the late week Chicago trade. Markets have fully priced in reduced Chinese exports and appear to be turning focus back to supply and demand. The next major even will be the August Crop Report in three weeks, which will have initial soy yield estimates from NASS.
- Chicago corn has rallied 10 cents off its early July low, and has scored a key upward reversal this week. World barley prices remain elevated. Gulf corn is still the world’s cheapest feedgrain for delivery into September. And the market is beginning to understand the potential for export demand over the next 6-8 months given crop shortfalls in Europe, and likely modest downward yield revisions in the Black Sea and S America. The US Gulf’s export capacity, especially amid reduced bean shipments, will further attract importers. Funds on Tuesday were net short 129,000 contracts in Chicago. This is a record for mid-July and compares to a net long of 105,000 on this week a year ago, and amid the loss of 40 million mt of global end stocks. We view the market as well under fair value. A bottom was scored in early July, and a slow demand-driven march higher lies ahead.
- Wheat futures hit yet newer weekly highs on the heels of rising cash markets in the EU and Black Sea. There is again not much new information, but Matif futures in Paris have broken out to the upside. Gulf HRW remains globally competitive into mid-autumn. Black Sea futures suggest Gulf HRW and Russian will be near parity come Oct/Nov. Managed funds on Tuesday were net long 18,000 contracts in KC, down 2,000 on the week. Work indicates that a long position is warranted amid growing export potential. And a year ago funds were long some 70,000 contracts in KC. Market liquidation has run its course, and we maintain a seasonal bottom was scored in early July. Global weather patterns are little changed. Too much rain will fall across Central Russia into the middle part of next week. Complete dryness persists in Australia. Argentine crop conditions this week are pegged at 38% good/excellent, vs. 66% a year ago. Higher prices lie ahead. Another downward revision in major exporter stocks/use is due in the USDA’s August WASDE.
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