The first week of December wasn’t necessarily one to remember for the grain markets.
The first week of December wasn’t necessarily one to remember for the grain markets. Friday’s WASDE report did not provide much in the way of surprises, but certainly could have been friendlier to soybeans. Before the report, expectations were for USDA to make at least moderate adjustments to their Brazilian soybean production estimates amidst the dryness that’s persisted across Central Brazil for the majority of the last two months, but USDA opted to kick the can down the road, and deal with that issue in 2024. South American weather will continue to be a primary market-mover over the next 6-8 weeks, along with U.S. export sales performance.
Corn:
Surprise, surprise – March corn had another week of trading in an extremely tight range. For the week, the contract settled at 485 ½, up just ¾ of a cent. Friday’s WASDE report didn’t provide any surprises for corn, as almost all of this month’s estimates came in right in line with traders’ pre-report estimates. The one notable surprise was a disappointment – USDA opted to leave Brazilian corn production estimates unchanged from last month at 129 MMT (average estimate of 127 MMT). The good news for bulls is that Brazilian production is estimated 8 MMT lower than last year (137 MMT). Export sales this week were less robust than last week, but were also in line with trade estimates, totaling 1.289 MMT. China has stepped up their purchasing activity over the last few weeks, and if that continues it could be a tailwind for the March corn contract. Prices closed just above our 481-484 pivot pocket, but bulls will have their work cut out for them next week if they’re going to test 3-star resistance between 493-496 ½. If they fail to defend the pivot pocket, it sets up a retest of 4-star support between 470-473. Managed money funds have tapered their bearish bets, but remain mostly pessimistic holding a net-short position of 160,533 contracts. Broken down, that is 175,928 long positions compared to 336,461 short positions.
Soybeans:
After flirting with our 4-star support pocket between 1294-1300 early this week, it appeared that January soybeans were set to move higher with a 16 ¼ cent rally on Thursday. However, the disappointing USDA report on Friday put the kibosh on that optimism pretty quickly. Despite the ongoing weather concerns in Central and Eastern Brazil, USDA only modestly adjusted their Brazilian estimate lower to 161 MMT (163 MMT last month). As with corn, export sales performance has been encouraging, but this week’s sales were largely unremarkable. Sales this week fell smack-dab in the middle of the traders’ estimates at 1.518 MMT. For the week, January soybeans settled 21 cents lower at 1304. With the disappointment of Friday’s report, the contract seems set to retest 4-star support next week between 1294-1300. If bulls fail to defend this support pocket, it opens the door to a move closer to the lower 1270’s. Funds remain cautiously optimistic holding a net-long position of 36,633 contracts, but that confidence is waning. This is the 3rd consecutive week that managed money has alleviated their net-long position. All in all, funds hold 91,302 long positions compared to 51,669 short positions. Weather in Brazil will continue playing a pivotal role in price action for the January and March soybean contracts moving into 2024.
Wheat:
March wheat staged its second two-week winning streak since the first and second weeks of October. For the week, March wheat gained 29 cents to settle at 631 ¾. Today’s USDA report was effectively a non-event for the wheat complex, but bulls will have to start next week strong after failing to blow past the 100-day moving-average in Friday’s session. While we closed above our 622-631 pivot pocket, Friday’s move lower is concerning. If bulls allow price to re-enter the pivot pocket, it’s likely that we will ultimately retest 3-star support next week between 608 ½ and 611. The contract is teetering on overbought levels, and it would not be surprising to see a modest correction as momentum is showing signs of slowing. Fortunately for bulls, if they can keep this contract afloat early next week, they may garner some assistance from short-covering. Managed funds are still net-short 96,222 contracts. In order to exit those short positions, they’ll have to buy each of those 176,449 contracts back. Meanwhile, managed money has just 80,227 long positions.
