- Managed funds on Tuesday extended their net short position in corn, wheat, soybeans, cattle and hogs by 79,000 contracts to 118,000. This mostly occurred on corn, wheat and soy oil. This is also the second largest net short on record for mid- September, and we expect the speculative community to be a bit more cautious with additional new shorts moving forward. Until favorable weather can be confirmed in S America in Dec/Jan, downside risk is limited.
- It was much quieter and lower volume day of trade through Friday, with soybeans consolidating gains. Soybean bears were disappointed that a much deeper correction did not unfold, and strength in the corn market offered late week support. The Commitment of Traders report showed that through Tuesday, funds were net short 82,200 futures contracts and net long 12,400 in options. The combined net short position of 69,800 contracts was the most since January. Hedgers have been covering positions through the summer break, and unwilling sellers. This week’s report showed that hedgers held a rare net long position worth 4,700 contracts. Harvest in the Northern Midwest and Plains states was slowed by rain this week, while progress in the Southern and Central regions was able to advance. We look for national harvest progress through Sunday to have reached 12-15% complete. Initial resistance for Nov beans is just above the market at the 50-day moving average.
- Dec corn rallied another 5 cents. Exporters Friday sold 121,000 mt to unknown destinations, and the world fob lineup still heavily favours Gulf corn over all other feedgrains. We mention Dec corn settled exactly at its 20-day moving average, and so a high closer next week will turn the charts more bullish. Managed funds on Tuesday were net short 141,000 contracts, close to expectations but which rivals sizeable short positions of recent years. Hanging over the market remains the potential loss of US soybean area in 2019, but work continues to suggest that corn is cheap at current prices. Crude ended steady, and continues to hold support above $70/barrel. Ethanol blend margins are incredibly profitable. Commodity indexes ended the week higher, and we wonder if more investment will be put to work in raw materials into late year. Watch chart patterns early next week.
- US and EU wheat futures ended narrowly around unchanged, and breaking news is lacking. However, as previously reported, Aussie cash prices this week have found new rally highs. Frost/freeze early in the week and ongoing dryness across much of the Aussie wheat belt is cited. Even higher prices lie ahead as the market sorts out domestic feed use requirements. The 10-day forecast keeps meaningful rain in Australia isolated to the coasts. Managed funds were net short 1,000 contracts in Chicago, and so were net short for the first time since mid-July. Having cleared excess market length, we expect the market moving forward to focus more upon rising world cash prices and tight major exporter stocks/use. The transition from a supply-driven bull to a demand-driven bull is occurring. Russian exporters remain aggressive with offers in spot positions, but deferred Black Sea prices are rather elevated.
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Weekend summary 21 September 2018
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