Last week was a very important trading week in the grain futures markets. The keynote was a USDA report that contained both bullish and bearish surprises and produced higher price volatility. Trading in the grains this week will be extra important, too, as last week there were important early clues emerging on new price trends.
Let’s break each market down.
The corn (ZCZ25) market bulls were already on the ropes but then suffered a knock-down last Tuesday following a surprisingly bearish USDA report that forecast record U.S. corn production when the combines start rolling this fall.
However, the bulls got back up Wednesday and then ended the week by scoring some strong counter punches that began to suggest a seasonal price bottom may have been put in place. December corn futures prices last week lost only 1/4 cent from the week prior. Bulls will have to show some important follow-through buying strength this week to better suggest a near-term price bottom is indeed in place.
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Traders in the corn and soybean markets this week will be focusing on the annual Pro Farmer Crop Tour that starts Monday and concludes with its final crop yield estimates released Friday at 1:30 p.m. CDT.
Weather in the Corn Belt will see another two weeks of favorable growing conditions for corn and soybean crops, suggesting high production potential. Drier weather beginning late next week will be beneficial for early maturing corn.
A bullish element for corn going forward is export demand for U.S. corn that has been strong due to current lower prices and a subdued U.S. dollar. That’s continuing to better drive exports and domestic demand.
The soybean (ZSX25) market bulls had a very good week last week, to suggest some more follow-through buying interest from the speculators this week. The USDA released a bullish monthly supply and demand report early last week that showed lower-than-expected U.S. soybean production and lower ending stocks forecasts. November soybeans last week hit a six-week high and closed at a technically bullish weekly high on Friday, suggesting some follow-through, chart-based buying from the speculators early this week.
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A bullish National Oilseed Processors Association (NOPA) crush report released Friday also gives the soybean market some legs this week. The U.S. soybean crush rose to a six-month high in July and exceeded most trade expectations. NOPA members crushed 195.699 million bushels last month, up 5.6% from the 185.270 million bushels in June and up 7% from a crush of 182.881 million bushels one year ago. It was the largest July crush ever reported by NOPA and the fifth largest for any month on record, NOPA data showed.
However, a lack of new-crop U.S. soybean purchases from China continues to worry soybean market bulls, even though President Donald Trump last week extended the tariff truce for an additional 90-day period. The pace of new-crop soybean export sales is at a six-year low, though USDA reported impressive export sales last week. Soybean traders will continue to monitor U.S.-China trade talks, or lack thereof.
The winter wheat (KEZ25) (ZWZ25) futures markets hit contract lows last Thursday, basis December contracts. However, good gains in corn and soybean futures markets late last week likely spilled over into some buying interest in wheat markets Friday. This week, look for wheat traders continuing to eye the corn and soybean markets for daily price direction.
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The U.S. winter wheat harvest is winding down and that means less commercial hedging pressure in the futures markets. Spring wheat has seen consolidative, sideways trade following a 92-cent drop from the June high to the August low. USDA’s lower-than-expected U.S. spring wheat production estimate last week failed to excite the bulls. Spring wheat harvest continues to advance, although it lags the five-year average pace.
On the positive side, the USDA last week lowered U.S. wheat ending stocks amid forecasts of increased U.S. wheat export demand. Also, global wheat ending stocks were lowered to a 10-year low. These are elements that will likely come closer to the front burner of the grains marketplace as U.S. harvests are completed.
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On the date of publication, Jim Wyckoff did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com
