The grain markets took a collective step back this week, with each of the major contracts settling the week in negative territory. The most disappointing aspect to this week’s price action was the December corn contract, which closed lower each day of the week aside from modest gains on Friday. The geopolitical risk premia building into some of the energies and precious metals markets has not affected the grain complex as of yet. However, if significant escalation occurs with third party nations or interest groups entering the conflict, it could bring volatility to grain prices.
Last Thursday (10/19), December corn managed to close above $5/bu for the first time since August first – settling at 505. Since then, the contract has endured a precipitous drop. December corn traded lower each day of this week except for Friday, which saw a modest 1 ½ gain. For the week, December corn settled 14 ¾ cents lower, to settle at 480 ¾ – 24 ¼ cents lower than last Thursday’s high. Friday’s settlement leaves the contract closer to our 3-star support pocket between 472 and 476. If bulls can defend this support pocket next week, the next operative target would be to break back into the 489-491 pivot pocket. Managed money funds have trimmed their net-short position over the last three weeks, but their bearish bets certainly paid off this week. Funds still hold a net-short position of 100,430 contracts, which equates to 270,444 short positions and 170,014 long positions.
Friday’s strong price action ate away a significant portion of the prior losses endured this week on November soybeans. We settled 17 ¾ higher on Friday at 1297 ¼. For the week, November beans were 5 cents lower, and we were not able to sustain a weekly close above the psychologically significant 1300 handle. With bulls on the defensive, they’ll be forced to defend 4-star support next week between 1280 and 1285. That support pocket is a strong line in the sand, as the next 3-star support pocket doesn’t come into play until we fall between 1247 and 1257. If bulls can defend our 4-star pocket, we may be able to stage a comeback to test our pivot pocket between 1299 ¾ and 1303. Funds remain neutral on the soybean contracts, but have started entering the bull camp bringing their net-long position up to 7,753 contracts. Broken down, managed money funds hold 73,419 long positions and 65,666 short positions.
Despite this week’s lower close, the December wheat contract continues to climb off of its contract lows that were put in place on September 25th. It should be noted that the wheat complex has arguably the most to gain from escalation in the middle east. Egpyt is the world’s largest consumer of wheat, and if they become involved in the conflict, we could see risk premium build its way into the wheat contracts across the board. A new trendline may be developing in the contract in conjunction with what is typically a bullish time of year for wheat prices. For the week, December wheat settled 10 ½ cents lower to close at 575 ½. As it stands, we are closer to our 568 ½-570 3-star support pocket, so bulls will be on the defensive next week in order to work prices back toward the 588-592 pivot pocket. Despite the lower price action this week, managed money continued to whittle down its net-short position, which now totals 92,254 contracts. Broken down, that is 74,376 long positions and 166,630 short positions.