The grain markets were lower again this week in spite of ample short-covering, and a strong start to the week.
Thursday’s export sales report put bears back into the driver’s seat with soybean sales failing to reach the bottom end of the trade’s expected range. Unsurprisingly, corn, soybeans, and wheat all sold off sharply after Thursday’s opening bell rang. Wheat continues to look like the most constructive component of the complex from both a fundamental and technical standpoint. Corn and soybeans will need to give bears a reason not to sell if we’re going to defend support next week.
Corn:
The corn market has been a snoozefest for the better part of the last two weeks. Wednesday’s trade served as a bit of a fakeout, with prices rallying 5 ¾ cents to settle at 452 ¼. Bulls were optimistic that this had the makings of a short-covering rally, but that failed to materialize. Export sales for corn this week totaled 954,800 MT (37,588,805 bushels), which was 14% lower from the prior week, but within traders’ expected range. Despite the ho-hum sales report, corn followed soybeans moving sharply lower in both Thursday’s and Friday’s sessions. For the week, March corn managed to close ¾ of a cent higher, to settle at 446 ¼. Much has been made about the size of the net-short position that managed funds hold in corn. However, a short-covering rally will only materialize if the sellers are provided with a strong enough reason not only to stop selling, but also buy back their short-positions. Is it possible for that to materialize next week? Certainly. The likelihood of it happening is a different question altogether. If Friday’s selling pressure carries into next week, it’s likely that we’ll see a retest of the recent low at 436 ¾. Managed funds’ net-short in corn now totals 265,285, which is only ~5k contracts greater than last week.
Soybeans:
Thursday’s disappointing export sales more than erased the strength early in the week, and likely sets the stage for March soybeans to retest support at 1200 next week. USDA reported 560,900 MT (20,609,541 bushels), which was below traders’ expected range. Technically speaking, the early week recovery was able to pull March soybeans out of oversold territory on a standard 14-day RSI. 1200 remains a very important line in the sand – it’s the lower boundary of our 3-star support pocket, and a break below that opens the door to retest the May 31st 2023 lows at 1142 ¼. Bulls have successfully defended the 12 handle 3 times already, and a fourth defense could be a cause for sellers to cover their shorts. Managed funds added 15,045 contracts to their net-short position which now totals 91,842 contracts. Broken down, it’s just 47,965 long positions vs. 139,807 short positions.
Wheat:
Despite succumbing to the selling pressure brought on by corn and soybeans, March wheat futures managed to finish the week with modest gains. For the week, the contract gained 7 cents and ultimately settled at 600 ¼. Managing to defend our 3-star support pocket between 595 ¾ and 600 was encouraging. If a rally is going to sweep the grain markets, it will likely be led by wheat prices moving higher. Wheat exports this week were middle of the road, totaling 451,400 MT (16,586,106 bushels), and the contract didn’t have much of a response to the figure on Thursday. Friday saw the contract shed the majority of it’s gains, by settling 12 cents lower to finish the week. If Bulls continue to defend the 6 handle, we will likely see a test of 4-star resistance next week between 618 and 622. Managed funds trimmed their net short position by a little over 4k contracts, and it now totals 64,541 contracts (71,222 longs vs 135,763 shorts).
