- The CoT report showed a big week of fund selling in the Ag markets. Across the 10 principle markets, funds were sellers in 9 of them. Hogs was the only market that funds were buyers in through the week. The largest selling was in soybeans, followed by soyoil and then Chicago wheat. Funds still maintained a small net long corn position. Across all 10 markets, funds were net sellers of 107,000 contracts, and were net short 25,000.
- Fund short covering supported a strong soybean rally overnight, though gains were pared back by the morning open. January soybeans end the week $.30 higher and marked the second consecutive close over the 100-day moving average, which has not happened since May. Commitment of Traders data showed that as of Tuesday, funds had sold nearly 27,000 soybean contracts and had increased their net short position to just over 71,000, the most since last January. That heavy short position helps explain the two day, 35 cent rally. Hedgers on the other hand used the break in Chicago to cover hedges, buying back close to 30,000 contracts to take their net short position to just 3,600. With a hefty payment coming from the government, we expect US farmers will become more aggressive sellers on a further rally in the coming weeks. Ahead of the end of month meeting between Presidents Trump and Xi, we expect breaks will find support from fund short covering and end user pricing. The risks are that a deal is struck and US/Chinese soy trade resumes.
- Dec corn rallied 4 cents and moved through all major moving averages. The next upside target rests at $3.78, and fundamental support will be available into the release of the USDA’s November reports next Thursday. The USDA also released its long term projections earlier than expected. This is done mostly for budgetary purposes and so is of course not official. However, the USDA’s idea is that acres will rise but so will total consumption. Exports are kept above 2,400 million. 2019/20 stocks/use is pegged at 10.6%, which is not bearish. There remains pressure on next year’s weather and yield. Competition for export demand via aggressive S American/Black Sea offers will cap rallies. Expensive barley and feed wheat, and tight spot supplies will support on breaks. Beyond the Nov WASDE, S American weather, which is favourable, will be increasingly important.
- US and EU wheat futures ended largely flat on the day and week. Little fresh news was available, and all eyes will be on the Black Sea cash market next week, and whether interior Russian prices continue to move higher. Russian flour prices will attract most attention from millers and government officials moving forward. Otherwise, the USDA’s long term projection included all wheat seedings in 2019/20 of 51 million acres, up 3.2 million from last year. Total use is forecast up 46 million bu. US wheat end stocks in 2019 are pegged at 933 million bu, vs. 956 million in 2018/19, and which is neutral relative to current prices. We maintain that a secondary bottom has been scored. Russian prices are likely to move higher, which will boost US/EU market share into early/mid-2019.
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Weekend summary 2 November 2018
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