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Grain Market Recap & 2-Minute Drill

Blue Line Futures - Fri Feb 23, 2:33PM CST

Weekly Grain Market Recap: 

Death by a thousand cuts persists. The slow grind lower saw March corn break the 4 handle and finished the week at 399 ¾.  That was the first close below $4.00/bu since October 26th, 2020. While corn exports have performed well in relative terms, soybean exports are morose. This week served as another disappointment leading corn, soybeans, and wheat futures to new lows. A glimmer of hope for grain bulls remains in SRW wheat, as it made an impressive comeback Tuesday – settling 20 ¼ cents higher on that day’s session after making a new low for the first time since late November. 

Corn: 

March corn futures broke hearts on Friday by settling below 400 for the first time in more than 3 ½ years, while May corn finished the week at 413 ½. Export sales this week were toward the lower end of the expected range, coming in at 820k tonnes (32.3 mil bu) – marking the lowest total in the last 6 weeks. Despite the week’s disappointing numbers, U.S. corn exports are still up nearly 29% on a YoY basis. While the fundamentals remain generally unfavorable, potential remains. Brazil will be planting second crop corn in the next couple of weeks, and the weather outlook remains a mixed bag. But, it won’t happen overnight. In order to pull corn prices off of the mat, we’ll need to see considerable dryness in South America in addition to managed money fail to roll their short positions. The former will be seen before the latter as the March contract settles on March 14th. Speaking of managed money, their net-short position of 340,732 contracts is a new record. As such, the propensity for a short-covering rally grows stronger. 

Soybeans

There’s no way around it – demand for American soybeans is abysmal. This week’s export sales totaled a mere 56k tonnes (2.1 mil bu). For context, the bottom end of the estimated range for this week’s sales was nearly 6 times greater than the realized number. The range of estimates was 300k-800k tonnes. Unsurprisingly, soybean futures took out the May 31st lows of 1150 on the May contract, and it doesn’t seem like we’re going to be catching a bid anytime soon. For the week, May soybeans were down 34 ½ cents, which is the largest weekly loss in 6 weeks – and the 10th consecutive lower close. The technicals aren’t providing any materially significant hope either. While we’re technically overbought, there’s no sign of bullish divergence. Moreover, volume grew for the 5th consecutive week. Whether the volume was longs throwing in the towel, or new shorts – volume increasing with price movement typically means an acceleration in trend. Managed money continues amassing a considerable short position, which now totals a 136,677 net-short – little change from last week. In order for soybeans to rally, they’ll need to be led by either corn or wheat. 

Wheat

If you’d told any grain trader that wheat was the most bullish component of the grain complex 6 months ago, they’d probably look at you like you have two heads. Yet, here we are. Chicago wheat futures were the only component of the grain complex to stage a higher close on a weekly basis. After taking out the late-November lows early in Tuesday’s session, May wheat prices managed to rally back 20 ¼ cents to close back at 579 ¼. For the week, May Chicago wheat futures settled 10 cents higher at 569. The 600 handle will now likely serve as formidable resistance. However, a settlement above 600 could be the technical fuel to a short- covering rally. K.C. and Minneapolis wheat have also performed well on a relative basis, with backwardation even rearing it’s head in Minneapolis wheat futures as recently as Tuesday. Ultimately, managed money is aware that their net-short in wheat futures has overstayed its welcome. While they added to their net-short position this week, a measley 68,524 contracts seems laughable compared to the 119,986 contract net-short position as recently as November 21, 2023. 

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On the date of publication, Oliver Sloup did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.

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