Grain markets were mostly higher this week with the dollar index showing signs of weakness for the first time in nearly 3 months. The November soybean contract was the only major grain contract to settle lower on the week, but at least the downside momentum began to slow compared to the prior 4 weeks. Further deterioration on the dollar index through the balance of harvest in the coming weeks could be a bullish tailwind for grain prices.
This week’s price action started off with a bang with December corn settling 12 cents higher to erase all of last Friday’s losses. Although we were not able to break through our 3-star resistance pocket between 489 and 491 on Tuesday or Wednesday, the contract remained resilient. Prices were off to the races again on Thursday rallying another 11 ½ cents to 497 ½, breaking through 3-star resistance and laid the groundwork for retesting the elusive 500, and our next 3-star resistance pocket between 502 and 506 ½. Unfortunately, we walked back some of the week’s gains on Friday, settling 5 ½ cents lower at 492. For the week, December corn was up 15 ¼ cents. Previous resistance should now act as support, so we can expect bulls to defend 489 to 491, and bulls hope to break through the 502 and 506 ½ resistance pocket ahead of us. This week’s strength forced managed money funds to trim their net-short position for the first time since the final week of August, and their net-short now totals 159,433 contracts. Broken down, that is 323,156 short positions compared to 163,723 long positions.
The November soybean contract was the lone component of the grain complex to settle lower on the week, but there were positives to take away from it. Tuesday saw November soybeans test our 3-star support pocket, and the June lows, by trading all the way down to 1256 ¾. After bottoming out there, the contract managed to rally back a full 16 cents to settle the day down just 4 ½ cents. The impressive performance Tuesday afternoon pushed the contract higher on both Wednesday and Thursday, and the contract made its way all the way up to 1283 ¾, before ultimately settling at 1280 ¾ Thursday. As in corn, November soybeans walked back the week’s prior gains – selling off 14 ¾ cents to settle at 1266. For the week, soybeans were down 9 cents, but that compares favorably to the 21 ¼ selloff last week, and 44 cents the week before last. Next week, bulls will have to defend 3-star support again between 1247 and 1257, and will hope to break back into the 1280-1285 pivot pocket. Managed funds are holding an objectively neutral position, net-long just 5,001 contracts right now, which is just 68,593 long positions and 63,592 short positions.
December wheat was able to defend last week’s contract lows, and 3-star support between 540 and 541 ½. In fact, the contract staged its first higher weekly close since the second week of September. Some of the strength in this week’s price action can be attributed to the 220,000 MT flash sale of SRW wheat to China for 2023/24 delivery. The reprieve that brings is an indication that U.S. wheat values are once again competitive on the global market. In Friday’s trade, the contract followed corn and soybeans lower, giving back 10 cents to close at 568 ½. For the week, December wheat was up 26 ¾ cents. If bulls can parlay this week’s strength to get above our 570 pivot pocket, they will look to test 2-star resistance between 585 and 587. Despite the positive price action this week, managed funds increased their bearish bets by increasing their net-short position to 98,788 contracts. That comes out to 70,744 long positions compared to 169,532 short positions. If we see continued strength next week, short-covering could lend wheat prices shorter-term support.