USDA Day!

Grains are mixed in the early morning trade as we await new news form the USDA.  Here are a few things we are keeping an eye on in today’s trade.

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Grain Prices Rally Ahead of USDA Report

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Estimates for today’s USDA Report

Corn

Technicals (May)
May corn futures broke out above our pivot pocket from 429 1/2-433 1/4 which accelerated the buying, taking prices as much as 30 cents off the low from February 26th. As mentioned in our yesterday’s interview with Chip Flory and AgriTalk, the 20-day moving average seems like such a simple indicator but the fact that everyone was watching it almost made it self-fulfilling. The next upside hurdle comes in from 440-441 with more significant resistance coming in from 447 1/2-450. On the flip side, previous resistance will now act as support (429 1/2-433 1/4).

Fundamental Notes

• Weekly export sales recap: Net sales of 1,109,600 MT (43,683,010 bushels) for 2023/2024 were up 3 percent from the previous week, but unchanged from the prior 4-week average. This was within the range of expectations and similar to the number we saw in last week’s report.
• The United States has been losing corn export business to Brazil as the South American country continues expanding its output, though top customer Mexico has secured a record volume of U.S. corn for shipment this year. Mexico’s large chunk of U.S. sales is aided by the fact that China accounts for just 6% of all U.S. corn sales so far, down from about 17% a year ago and about 28% two years ago. Japan’s 14% is above the recent average but below the pre-2021 levels, before China became a big U.S. corn buyer. -Reuters
• The future of U.S.-Mexico corn trade is uncertain as Mexico in recent years has proposed to ban or limit GM corn imports. GM corn accounts for the vast majority of U.S. production, though the lack of alternative options for Mexico has kept market participants’ concerns at bay. -Reuters

Seasonal Tendencies

We put together a more in-depth seasonal analysis article yesterday, zooming in on historical price action leading up to the quarterly stocks and prospective plantings report. Check it out here:

Weekly Seasonal Analysis Update – Blue Line Ag Hedge

Fund Positioning

We took a deeper dive into current Fund positioning and price action and how it compares with 2019. Check it out here:

Are Funds Overextended? – Blue Line Ag Hedge

Soybeans

Technicals (May)
Soybean futures are poking their head out above trendline resistance which started forming at the end of last year. Like seemingly every other market out there, prices are now knocking on the door of the 20-day moving average, something that we’ve not seen the market close above since the first half of December. It seems oversimplified, but if enough people are focusing on one indicator it could have self-fulfilling affects. If the Bulls can chew through and close above it, it could spur a move back towards the technically and psychologically significant $12.00 level. Today’s USDA report could have implications on whether we breakout or not. A failure to breakout likely keeps prices in a consolidation pattern.

Fundamental Notes

Weekly Export Sales: Net sales of 613,500 MT (22,542,259 bushels) for 2023/2024 were up noticeably from the previous week and from the prior 4-week average. This was above the top end of expectations.
China imported 13.04 million metric tons of soybeans for the first two months of the year, the lowest for the period in five years, customs data showed on Thursday. The imports are the lowest for the period since 2019. -Reuters

Seasonal Tendencies

Seasonal tendencies have been out the window to start the year, so I’m not sure how much weight one puts into them at this juncture, but seasonally we tend to see some consolidation and strength from the middle of March to the middle of April.

*Past performance is not necessarily indicative of futures results.

MRCI shows back tested results for a bullish seasonal that starts on March 17th and goes through April 21st. They show this as bullish for 13 of the last 15 years with the average rally being about 56 cents and the average loss being about 37 cents. See the table below.
*Past performance is not necessarily indicative of futures results.

Commitment of Traders Snapshot

(updated on Mondays)
Friday’s Commitment of Traders report showed yet another week of net selling by Funds, extending their net short position to 160,653 futures and options contracts. That’s an increase of 23,975 contracts, 20,576 of which were new short positions.

Wheat

Technicals (May)
Wheat futures were able to trade on both sides of unchanged in yesterday’s trade and are attempting to stabilize in the overnight and early morning hours. The chart looks like a technical graveyard as the Bulls (if any left) have their work cut out for them to right the ship. That would start with consecutive closes back above 550-555.

Fundamental Notes

• Weekly Export Sales: Net sales of 271,100 MT (9,961,217 bushels) for 2023/2024 were down 17 percent from the previous week and 16 percent from the prior 4-week average. This was at the lower end of expectations.
• Rumors Confirmed. Private exporters reported cancellations export sales of 130,000 metric tons of soft red winter wheat for delivery to China during the 2023/2024 marketing year.

Seasonal Tendencies and Fund Positioning

We took a closer look at shorter- and longer-term seasonal trends for Chicago wheat futures as well as examined the current positioning of Funds. Check it out by clicking the link below:

A Closer Look at the Wheat Market – Blue Line Ag Hedge