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Today’s Prices
Grain prices fished lower to sharply lower as there is some rain in the forecast for southern Brazil over the next couple of weeks and profit taking ahead of year-end likely generating additional selling.
Grain Market News
Corn – Commodity Fund Position
This chart is for corn and for the managed money funds. Those are funds that could be long or short depending on their attitude in the market. Manage money funds were long 360K contracts as of last Tuesday. That’s very close to the long position of about a month ago at 366K but still short of the 401K contract long position back last spring when the U.S. was discussing the possibility that the U.S. could runout of corn if demand was not slowed down.
Corn: Commodity Fund Position
If we look at that same data on a longer term perspective you can see 360K is fairly large position for the funds in corn. They hit 401K last spring and the record long was 429K long contracts back in 2010. Certainly, the funds are long and bullish in the corn market.
Soybean – Commodity Fund Position
Looking at the managed money funds for soybeans. Funds are long 72K contracts. That’s a big increase from last week. Threatening South American weather has encouraged the funds to get longer in the bean market. But at 72K that is only a moderate long position. We’ve seen multiple long positions much, much larger than that over the past 7 or 8 years.
Soybean: Commodity Fund Position
We can see that on a continuous fund position chart going all the way back to 2006. 72K contracts is very moderate long, by no means an exceptionally large long similar to the corn market. That may be why corn was down 10 cents today while beans being down only down 3-5 cents. Beans only being down 3-5 cents today also indicates that the funds are not nearly as long in the bean market as they are in the corn market.
Wheat – Commodity Fund Position
This is for Chicago went and the funds are short 11K contracts in Chicago wheat as of Dec 21st. It’s not unusual for the funds to be short in wheat against corn and beans. As we mentioned, when we look at KC and Mnpls wheat the funds are long 71K contracts so that can certainly offset the small short in Chicago.
Wheat: Commodity Fund Position
A continuous chart of managed money funds for wheat shows a small short position not unusual at all over the last 16 years. And again, keep in mind the funds are long 71K contracts when you combine KC and Mnpls.
Grain Market News
Observed Surface High Temps
High temperatures yesterday in Argentina in the upper 90’s and 100’s. Paraguay and Uruguay in the mid and upper 90’s and southwestern Brazil in the mid and upper 90’s. So certainly the weather is still threatening and drought conditions are expanding and many private analyst have already reduced production in South America from anywhere from 4-7 mmt and this is between 140-270 mmt of both corn and soybeans. Certainly, some damage has already been down and now the question is how long will the hot, dry weather continue.
SA 2-Week Precipitation Forecast
The first week of the forecast shows Argentina fairly dry with some light showers in northern Argentina but certainly much less than normal. That’s the same for extreme southern Brazil, Paraguay, and Uruguay as well. The rains do dip farther south in the Brazil in the first week of the forecast and that continues into the second week of the forecast. That has some traders on edge today and a little cautious is not that we have a major weather pattern change but the dry areas could shrink a little bit if the rains push a little bit farther to the south in southern Brazil over the next couple of weeks.
Temperature Anomaly
Temperatures still look very warm. Argentina above to much above normal temperatures over the first week of the forecast. That extends into Urugay, southwestern Brazil, and Paraguay as well. So we’re not looking at a change in the pattern. We’re just looking at the possibility that some rains could move farther south in Brazil and shrink slightly the dry areas.
March Corn Chart
Corn prices had a key reversal today. They established a new high for the move at $6.17 then turned around and closed below yesterday’s low. Technically that is a key reversal and is sometimes a sign that a market hit a top or at least an area where a significant correction could take place. Today’s key reversal was enough to turn the technical indicators lower as well so a pretty negative day on the chart and technicals. To prevent a further correction to the downside, corn would need to see a recovery in tomorrow’s trade.
January Soybean Chart
Soybean prices also made a new high for the move today up to $13.75. They did turn around and closed lower. It was not a key reversal. It was a a reversal down. A key reversal would have had to close around the $13.30 level. Nonetheless a somewhat disappointing close in beans. The trend is clearly pointed upward but today’s lower close was enough to start turning the technicals to the downside as well. We view soybeans similar to corn, we need to see the bean market try to find some support tomorrow. If not, a further correction could take place. Major chart support down at $12.89 where we also have our upward trendline coming into play.
March KC Wheat Chart
Wheat prices had a key reversal yesterday where they made a new high for the move up to $8.71, turned around and closed below the previous days low. That was yesterday and major follow through to the downside right down to chart support where our 10, 20, and 40-day moving averages are all converging. But nonetheless we saw major follow through in the wheat market to yesterday’s key reversal. Technical indicators have also turned down so at this point it does appear the wheat market could see some additional downside risk at least in the near term with major chart support coming in around $8.10-$8.15 level.
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