- Following higher overnight trade, soybeans were able to extend gains ahead of the weekend, closing 9 cents higher for the day and barely below unchanged for the week. News at the end of the week was limited, but rains (and snow in the North) have slowed harvest, and funds are giving up on their short Chicago grain positions. News that President Trump could meet with the Chinese president next month has also renewed optimism that a trade deal could be reached. The Commitment of Traders report showed that funds had cut their net short soybean position by 3,000 contracts, but were large buyers in the soymeal and soyoil markets. In soymeal funds bought more than 12,000 contracts, taking their ownership stake to a seven week high of 39,000 contracts. In soyoil funds covered another 10,000 contracts and cut the net short position to the lowest since last April. In the last three weeks, funds have bought close to 69,000 contracts of soyoil, which has nearly been a record buying spree. Without a trade resolution, we see spot soybean in a broad $8-9 range, with an immediate target at $8.75 Nov.
- Dec corn hit a new seven-week high amid follow-through fund short covering. There is now talk of a sub-180 bushels/acre national yield, as well as talk of disappointing yield checks across the Western Corn Belt. New harvest data will be slow to find the market amid recent rainfall and cool temperatures, but very close attention will be paid to daily yield updates. Money flow is noted, but our work maintains fundamental value lies between $3.70-3.95, basis spot. US export sales totaled 40 million bu. This is down noticeably from recent weeks but still above the pace required to meet the USDA’s forecast. Total export commitments through Oct 4 are up 51% from last year. Managed funds on Tuesday were short a net 34,000 contracts. This evening we estimate managed funds are flat. A modest net long is expected as money leaves equity markets, and the US yield loss could pull end stocks below 1.6 billion bu. A bearish outlook requires confirmation of a large US acreage shift and favourable Brazilian weather next spring.
- US wheat futures rallied 7-10 cents on fund short covering. As of Tuesday managed funds were short a net 17,000 contracts in Chicago, and this evening are estimated to be short a net 28-30,000 contracts. There is little fresh news available, but prevailing trends are supportive. Dryness will persist across much of Europe and the Black Sea into the very end of October. Heavy snow will keep harvest sluggish across Saskatchewan and Manitoba. Notice that the EU market broke through a longer term downtrend line in late September, and close attention will be paid to money flow in wheat markets next week. US export sales were an uneventful 12 million bu, vs. 16 Mil the prior week, but Black Sea offers for Dec remain at $240-245/mt, near parity with Gulf HRW. Recall deferred Black Sea offers have held support as the months pass, and so we expect the US market to find equilibrium at $5.15-5.30 in the near term. A close above $5.30, turns the Dec Chicago chart bullish.
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Weekend summary 12 October 2018
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