KC WHEAT CONTINUES ITS RALLY
Overview
A little bit of a mixed bag here to start the week. Where Chicago leads us on the downside while KC leads us to the upside, and July beans end the day -13 cents off their highs.
As for the Black Sea agreement. There was no meeting Friday, as Russia showed zero interest in extending the deal. Ukraine says Russia has effectively stopped the deal. The deal expires at the end of next week. We also saw some more attacks on Ukraine over the weekend.
Friday's commitment of traders showed some massive selling. Where it showed the funds are short over 100k contracts of corn, on one of their largest net-selling weeks in history. While the funds approach a near record short position in Chicago wheat. One has to imagine if we get some additional weather scares this could lead to more short covering. The big question is, do they really want to be that short going into growing season and with plenty of wild cards left in the deck?
Export sales this morning were pretty disappointing, as corn continues it's recent trend. Failing to string together two good weeks in a row.
Weather looks mixed. Some areas are looking to get some favorable rains, but rains in the northern plains could slow some spring wheat planting. Texas and Oklahoma are also expected to receive some rains, but Kansas again looks like it might miss out, especially in the dry areas.
This week it all comes down to what the funds want to do. Will they defend their position or create some more short covering. A big portion of this decision will come down to weather and their positioning ahead of the report Friday.
Crop Progress & Conditions
Corn 🌽
Planted 49% (Trade 48%
Last Week 26%
Last Year 21%
Average 42%
Beans 🌱
Planted 35% (Trade 34%)
Last Week 19%
Last Year 11%
Average 21%
Spring Wheat 🌾
Planted 24% (Trade 28%)
Last Week 12%
Last Year 26%
Average 38%
Winter Wheat 🌾
Good/Excellent 29% (Trade 30%)
Last Week 28%
Last Year 29%
Poor to Very Poor 44% (Worst for the week since 1996)
Last Year 39%
Last Week 42%
Today's Main Takeaways
Corn
Corn is now 30 cents off it’s lows from last Wednesday, but ultimately ended the day today unchanged in a tight 7 cent trading range.
The commitment of traders data from Friday showed us heavy selling. As it showed the funds holding a massive short position of over 100k contracts, which is their shortest position since August of 2020. The funds sold over 100k contracts over the week, making it just the 4th time in history they have done so.
However, we did see some short covering mid-week which helped us rally off those lows. So the question now is, do we see the funds continue to get rid of that short position and help us rally, or do they defend their position. It will all come down to weather and what they are thinking for positioning ahead of the report. But if we get some unforeseen or unfavorable weather, we could again see them create a short covering rally.
Do you want to be that short going into the growing season? One wouldn’t think so. Even if we do get a slightly bearish report Friday, I think they could be quick to buy the break.
Taking a look at South America. We still have the obvious problems in Argentina. Brazil's corn is also just too dry, which could look to add support, but some argue that their crop is getting larger not smaller.
As mentioned, the optimism that the Black Sea deal will be renewed is slowly dwindling as Russia essentially said they want nothing to do with an extension. We still have until the end of next week for a conclusion, so we will have to see how that plays out. But if the deal does indeed not get renewed, this will likely add some support.
Friday we will get one of the more important USDA reports of the year, as it will give us our first official look at the new-crop balance sheets. It’s still early to make any major changes to production, so the trade will be focusing on the demand estimates.
Bears are arguing that we see the USDA lower its US export estimate. It will be interesting given the recent cancellations from China and their willingness to buy from other countries such as Brazil. With this, bears argue we see more competition for US exports down the road.
It will also be interesting to see if the USDA brings down it’s initial yield of 181. Bulls would like to see that number come in closer to the 178 range.
Going forward, this week is going to be all about weather, war, and what the funds decide to do ahead of the report. This report could definitely come in on the bearish side. But if it does, I think we ultimately see the break eventually bought. Was last week's low our bottom? It’s tough to say with the upcoming report. But we still think we see our lows made by the end of the month and we think this will again be a year where we make our highs come June, July, August.
Is A Summer Corn Rally In Place?
Technical Analysis from Vince Irlbeck,
Listen Here
He said:
December corn hit an important support line that has been set in place since the 2020 lows. By the Elliot wave rules I subscribe to, we should retest the highs by June or July. It may not break old highs but it should put on a good run.
If for instance we break old highs, it would be a five-point star topping formation like Cattle had, and would be considered a blow-off top. That is something to consider in the future and not something set in stone. Needless to say, we should have a healthy rally into June or July.
We had exceeded the 50% retracement only by 15 cents but considering the support line was 15 cents under it, I would consider it completed. The weekly RSI dropped down to the oversold status while the daily RSI hit good divergence. It’s time to rally.
Corn July-23
Soybeans
Beans were able to find support mid-week last week, and are now 40 cents off their lows…..
The rest of this post is subscriber-only content. Please subscribe to continue reading.
OUR BIGGEST SALE EVER ENDS FRIDAY
We are offering our biggest sale for Friday’s USDA report. Lock in our stuff for a massive discount before its gone. Every update sent via text & email.
UNSURE? TRY 30-DAYS
INCLUDED IN TODAY’S UPDATE
Beans & wheat outlook
Funds are nearing record short in wheat. That’s a lot of volume to undo…
Wheat abandonment acres. Last time we had this many was 1996.
Factors in our market
Reasons we could rally
Check Out Past Updates
5/7/23 - Weekly Grain Newsletter
AI Thinks We Are Going Higher. Do You?
5/5/23 - Audio Commentary
If This Was Short Covering, Why Didn’t Chicago Lead Us Higher?
5/4/23 - Market Update
Grains Rally Off Lows
5/3/23 - Audio Commentary
Wheat Prices Catch Fire
5/2/23 - Market Update
Grains Fade of Highs
5/1/23 - Market Update
Wheat Continues to Fall
4/30/23 - Weekly Grain Newsletter