Funds Rushing into Commodities

Saxo Bank publishes two weekly Commitment of Traders reports (COT) covering leveraged fund positions in commodities, bonds and stock index futures. For IMM currency futures and the VIX, we use the broader measure called non-commercial.

This summary highlights futures positions and changes made by speculators such as hedge funds and CTA’s across 24 major commodity futures up until last Tuesday, July 7. During this U.S. holiday shortened week the appetite for risk was firm with the Nasdaq 100 rising by 3.6% and the CSI 300 by a staggering 12.8%. Strong buying across all sectors lifted the Bloomberg Commodity Index by 2.4% with gains seen in all but four of the 24 major commodity futures tracked in this update.

Hedge funds responded to the favorable price movements by raising bullish bets in all but four of the 24 major commodity futures tracked in this update. While the biggest price gains were seen across the energy sector, led by gasoline and natural gas, it was short covering in the grains sector that helped lift the combine net-long back above one million lots for the first time since late January.

Energy

Despite solid price gains, both WTI and Brent crude oil were net-sold with the combined net-long falling by 26k lots to 557k lots. The reductions primarily due to long liquidation as both contracts struggled to break resistance at $41/b in WTI and $44/b in Brent. However, based on the reduction being led by long liquidation and not fresh short selling, the bullish narrative has yet to challenged. The long position in natural gas jumped by 27% as an emerging heatwave across the U.S. helped lift the price by 7%

Latest developments

Crude oil trades lower today following Friday’s rally. Key focus this week will be Wednesday’s OPEC+ meeting where the group needs to decide whether to keep the temporary 9.6 million barrels/day production cut into August or begin to restore up towards 2 million barrels/day. Reports over the weekend said the group look set to ease oil cuts as demand continues to recover.

The decision however comes at a time where Libya attempts to restore production, U.S. stocks are close to record levels while the pandemic is far from under control. Especially across the three biggest fuel consuming U.S. states. Both benchmark oil contracts in our view remain range-bound with resistance at $41 on WTI and $44 on Brent capping the upside

Metals

A relatively quiet week across the metal space with funds adding exposure to all five contracts. The gold net-long only increased by 1% during the reporting week that finished the day before the yellow metal traded above $1800/oz. for the first time since 2011. However, with funds increasing fresh short positions (+6k) almost by as much they added to the long side (+7.6k), some nervousness may emerge about the underlying strength in the market. Something that was highlighted on Friday when after having struggled to attract fresh momentum on the break above $1800/oz closed back below on virus treatment hopes,.

The HG copper net-long rose 14% to reach 31.5k lots, the highest since June 2018. This before finishing another strong week at $2.8975, a level last seen in May 2019. The 40% rally since the March low has been driven by a forceful combination of increased Chinese demand, a speculative surge and most recently coronavirus disruptions to supply from Chile and Peru, the world’s two largest producers. The latter explaining why copper, at least in the short term, can trade above pre-pandemic levels.

Latest developments:

HG Copper took aim at $3/lb during the Asian session thereby continuing its impressive run of gains that has taken it to the highest in more than two year and well above January’s pre-pandemic level. On top of the support being provided by virus-related supply disruptions from the world’s two largest producers in South America, the market now also has to deal with the risk of strikes. This after workers at an Antofagasta mine in Chile have rejected a final offer while another operation will conclude voting today on whether to accept a final offer.

Precious metals trade higher this Monday, inspired by a the general risk on that has driving stocks higher and the dollar lower. On top of this some safe have demand due to a continued surge in virus cases and US-China trade and political tensions. Adding to this copper’s impressive run of gains which has given silver a fresh boost. The price is once again challenging resistance at $19/oz while the XAUXAG ratio has dropped to 95.50. A break below the June low at 94.50 could be the trigger that signals a move in the spot price towards $20/oz.

Agriculture

Funds spent another week scrambling to adjust grain positions to a potential more friendly price outlook. Corn was bought for a second week and the net-short has now more than halved to 142k lots. The turnaround since June has been let by a pick-up in ethanol demand and most recently the surprise June 30 announcement that U.S. farmers had planted less corn than previously expected.

The wheat net-short was trimmed by 14% to 33.5k lots just before the price surged above $5/bu in response to concerns about shrinking crop production estimates in countries from France and Russia to Argentina.

Soft commodities had a mixed week with sugar being bought despite trading rangebound around 12 cents/lb. The cocoa short jumped by 90% to 21k lots, a ten-month high, as the pandemic continued to sap demand for both cocoa and coffee.

For a look at all of today’s economic events, check out our economic calendar.

Ole Hansen, Head of Commodity Strategy at Saxo Bank.

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This article is provided by Saxo Capital Markets (Australia) Pty. Ltd, part of Saxo Bank Group through RSS feeds on FX Empire


What is the Commitments of Traders report?

The Commitments of Traders (COT) report is issued by the US Commodity Futures Trading Commission (CFTC) every Friday at 15:30 EST with data from the week ending the previous Tuesday. The report breaks down the open interest across major futures markets from bonds, stock index, currencies and commodities. The ICE Futures Europe Exchange issues a similar report, also on Fridays, covering Brent crude oil and gas oil.

In commodities, the open interest is broken into the following categories: Producer/Merchant/Processor/User; Swap Dealers; Managed Money and other.

In financials the categories are Dealer/Intermediary; Asset Manager/Institutional; Managed Money and other.

Our focus is primarily on the behaviour of Managed Money traders such as commodity trading advisors (CTA), commodity pool operators (CPO), and unregistered funds.

They are likely to have tight stops and no underlying exposure that is being hedged. This makes them most reactive to changes in fundamental or technical price developments. It provides views about major trends but also helps to decipher when a reversal is looming.

Gold, Silver, Crude Oil and Grains

What is our trading focus?

XAUUSD – Spot gold
XAGUSD – Spot silver
XAUXAG – Gold-Silver ratio
COPPERUSSEP20 – HG Copper
OILUSAUG20 – WTI Crude oil
CORNSEP20 – CBOT Corn


Gold

Gold has reached another new high for the cycle with $1800/oz now within striking distance, a level that the futures contract (GCQ0) has already reached. The market capped its best quarter in four years as the WHO warned that the worst of the pandemic is still to come. The break higher looks intact as long as the daily closes remain north of 1,745-1,750 area. Gold will continue to look for direction either from new policy measures aimed to force inflation higher or negative real rates more negative or some more participation from the US dollar and other commodities, especially silver.

Silver

Silver has outperformed gold this week with the XAUXAG ratio falling below 98 (ounces of silver to one ounce of gold). With copper racing higher to reach $2.75/lb. on virus related supply worries and firming Chinese demand, silver’s short-term upside potentials could be better than golds. Especially on a break above the March high and trend line resistance around $18.40/oz.

Crude Oil

Crude oil trades higher, but within the established range, after the American Petroleum Institute reported a bigger-than-expected stockpile drop last week of 8.2 million barrels. If repeated by the EIA in their weekly report today at 14:30 GMT it may offer some additional support to a market currently worried by the demand impact from renewed lockdowns and the surging number of virus cases in the U.S.

Also supporting the price was the monthly production report from the Energy Information Administration which found that U.S. production dropped by 5.3% in April to 12 million barrels/day. Thereby confirming the slowdown seen in the weekly estimates reported every Thursday in the mentioned inventory report.

A monthly OPEC oil production survey carried out by Reuters found the group collectively cut production to the lowest in two decades last month. The additional deep cuts promised and delivered by Saudi Arabia and other Gulf Arab members helped push the groups compliance above 100%.

We maintain the view that crude oil is likely to remain range-bound while the market tries to figure out the demand impact from renewed virus cases. Weak demand from motorists during the key holiday demand season may pose a threat to the current stability. Not least considering the pressure on OPEC+ to deliver a prolonged and economic painful production cut extension beyond July.

Chart source: Saxo Group

Looking ahead to the inventory report the market, apart from looking for a drop in crude stocks, will be looking for signs of renewed weakness in gasoline and diesel consumption, just as the July 4th holiday signals the beginning of the U.S. summer driving season. As per usual I will post results and charts on my Twitter @Ole_S_Hansen

U.S. grain markets led by corn and soybeans rallied strongly on Wednesday after a government report showed a bigger-than-expected reduction in the planted acreage. Corn jumped 4% after surveys over-estimated the U.S. acreage by the largest amount since at least 2005. U.S. farmers entered the fields this spring at a time of peak uncertainty with low prices, poor outlook and the pandemic raging. As a result they reduced the corn acreage to 92 million acres (95.1 expected) and soybeans to 83.8 from 84.8 expected.

A separate USDA report however showed that domestic quarterly grain stocks were bigger than expected. Primarily due to lower ethanol linked demand for corn and reduced soybean exports to China during the lockdown.

Corn’s dramatic turnaround from a $3.15/bu low on Monday to a $3.45/bu high today could force continued buying from funds holding an elevated short position. Support now at $3.39/bu.
For a look at all of today’s economic events, check out our economic calendar.

Ole Hansen, Head of Commodity Strategy at Saxo Bank.

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This article is provided by Saxo Capital Markets (Australia) Pty. Ltd, part of Saxo Bank Group through RSS feeds on FX Empire

Crude Oil Demand; Gold Longs cut Again

Saxo Bank publishes two weekly Commitment of Traders reports (COT) covering leveraged fund positions in commodities, bonds and stock index futures. For IMM currency futures and the VIX, we use the broader measure called non-commercial.

The below summary highlights futures positions and changes made by hedge funds across 24 major commodity futures up until last Tuesday, June 9. Appetite for risk remained high that week, not least following the better-than-expected US job report on June 5. The S&P 500 rallied 4.2%, the dollar index lost 1.4% while bond yields jumped. The Bloomberg Commodity Index climbed 1.5% with gains seen across all sectors with the exception of precious metals.

A mixed week in commodities which despite broad price gains did not yield much in terms of major position changes. Crude oil continued to be bought albeit at a much reduced pace, fuel products were sold on rising overhang of stocks while natural gas held steady. Precious metals remained out of favor with the gold and silver longs dropping further while enthusiasm for copper attracted strong buying. Grains, led by corn, continued to be sold while the sugar position flipped back to long. Thereby becoming vulnerable to profit taking after the rally’s main engine, crude oil, began looking exhausted.

Energy

Buying of crude oil slowed despite another week of strong gains for both WTI and Brent crude oil. WTI saw the smallest amount of buying in this cycle with bullish bets close to a two-year high. Elevated levels of fuel products in the U.S. drove a reduction in the gasoline (RBOB) net-long to a three-year low and a rise in the distillate (ULSD) short to a three-month high.

Metals

Gold selling extended into a third week with the net long falling by 9k lots to 127k lots, a one-year low and down 55% since the February peak. Copper meanwhile and as expected attracted additional buying following the technical break above $2.50/lb, a key level of support-turned-resistance since 2017. The near five-fold jump took the net-long to 14k lots, a 15-month high.

Agriculture

Ahead of Thursday’s global supply and demand outlook report from the US Department of Agriculture, the corn short had extended to 297k lots, a 13-month high and biggest seasonal short in at least 20 years. This despite a continued steady recovery in the price. The wheat short jumped by 88% ahead of the WASDE report which pinned global stocks next year at a record high. The soybeans long meanwhile more than doubled on increased Chinese buying.

The soft sector was mixed with the oil-related rally in sugar helped flip the position back to a net long while the Arabica coffee short more than doubled in response the deteriorating technical outlook.

For a look at all of today’s economic events, check out our economic calendar.

Ole Hansen, Head of Commodity Strategy at Saxo Bank.

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This article is provided by COT, part of Saxo Bank Group through RSS feeds on FX Empire

WTI and Copper Bought, Gold sold as Risk on Reigns

Saxo Bank publishes two weekly Commitment of Traders reports (COT) covering leveraged fund positions in commodities, bonds and stock index futures. For IMM currency futures and the VIX, we use the broader measure called non-commercial.

The below summary highlights futures positions and changes made by hedge funds across 24 major commodity futures up until last Tuesday, June 2. A week where appetite for risk driven by stock market euphoria leading to hopes of a V-shaped recovery continued to be the dominant force.

The Bloomberg Commodity Index rose 0.7% with gains in energy, metals and grains being off-set by losses in softs and livestock. Speculators only made small changes to their positions with the net-long across 24 major commodity futures increasing by 2% to 545k lots. Buying of WTI crude oil, gas oil, copper and cotton being off-set by selling of gold, soybeans, corn and coffee.

Energy

Buying of WTI crude oil extended into a 9th week with funds adding 17k lots to bring the net-long to 380k lots or 380 million barrels, the highest since July 2018. Short sellers added small length for a second week thereby keeping the long/short ratio steady. The Brent crude oil net-long saw a small reduction as short-sellers added length for the first time since March. Despite dropping by almost 9% the natural gas long was kept close to unchanged with both long and short positions rising.

OPEC and its oil-producing allies agreed on Saturday to extend the group’s historic 9.7 million barrels/day production cut by one month to the end of July. As we highlighted in our latest update the risk of failure, despite concerns about non-compliance from a handful of producers, was limited given the need to support the price while lockdowns are eased and demand recover. A recovery that potentially risks being slower than the market expects due to the risk of second waves.

According to the latest weekly EIA report, demand for distillates in the US, which is mainly diesel, hit a 1999 low some 30% below the five-year average. Gasoline demand meanwhile has recovered but was 1.9 million barrels/day or 25% below the average for this time of year. With the deal having been all but priced in ahead of the meetings the risk to crude oil remains balanced. Speculative momentum may see both WTI and Brent take aim at closing the gaps to $41.05/b and $45.18/b respectively.

However much higher prices at this early stage in the recovery carries the risk of becoming self defeating as it invites back increased production from high cost producers, not least along the US shale patch. The market may soon also begin to focus on rising production after July from core OPEC members while Libya is showing signs of returning production.

Metals

The lack of short-term tactical opportunities together with the rising risk appetite seen across other asset classes, continued to cut interest in gold. Last week speculators cut bullish bets on COMEX gold futures by 8% to 137k lots, a one-year low. This during a time where demand for gold via bullion backed exchange-traded funds registered a new record with total holdings rising above 100 million ounces. Part of this development may be a product specific challenge that the futures contract currently faces.

The transatlantic disconnect that occurred between gold futures traded in New York and spot gold traded in London back in March left many market makers with heavy losses. This after the spot to futures spread, the so-called Exchange for physical or ETF, blew out thereby forcing cut backs and reduced risk appetite among market makers normally assuring a well functioning market place. These developments are likely to have led to some investors and traders instead focusing on bullion-backed ETFs.

The silver net-long held steady at 27k lots with the near 4% rally failing to attract fresh long positions. Potentially due to the fact that silver’s recent outperformance against gold reached its target as highlighted through the gold-silver ratio. Additional gains in silver may now require support from gold which struggled towards the end of week when a stronger than expected US job report sent real yields higher and gold lower.

HG Coppers continued recovery and flirtation with key resistance at $2.50/lb – that got broken on Thursday – finally saw the net switch to a long position for the first time since January. Dictated by the mentioned breakout funds are likely to add additional speculative length with the price now potentially taking aim at $2.60/lb.

Agriculture

The UN FAO’s Global Food Price Index reached the lowest monthly average since December 2018 last month. Covid19-related declines extended to a fourth month with all sub-indices with the exception of sugar seeing declines. A development which is also being replicated by the speculative exposure with hedge funds holding net-short positions in seven out of the ten grains and softs contracts tracked in this report.

Selling of corn continued with the net reaching a one-year high at 282k lots. This despite signs of a recovering price in response to increased ethanol-linked demand, The rising fuel cost theme also supported another week of short-covering in sugar. Hardest hit was Arabica coffee after the recent technical break below key support wiped out the remaining long with a net-short of 7k lots emerging.

Ole Hansen, Head of Commodity Strategy at Saxo Bank.

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This article is provided by Saxo Capital Markets (Australia) Pty. Ltd, part of Saxo Bank Group through RSS feeds on FX Empire

Commodity Weekly: Crude Oil Frets Geopolitics, Sluggish Demand Bounce

The energy sector gave back some of their record monthly gains, industrial metals paused while precious metals rose on increased geopolitical concerns, a weaker dollar and lower bond yields.

Commodities trading was mixed during the final week of May. A month that turned out to be the come-back month for many markets following the Covid-19 related collapse seen during Q1. The continued easing of lockdowns around the world have, despite dismal economic data, raised hopes that a V-shaped recovery may occur over the coming months.

This is optimism we unfortunately do not share – with millions of workers unlikely to return to work, together with the risk of the virus re-emerging as some economies attempt to open-up too soon.

The Bloomberg Commodity Index traded lower, with the energy sector giving back some of their record gains seen after the April collapse. Industrial metals also traded softer on rising US-China tensions despite the National People’s Congress introducing new stimulus measures. A challenge to precious metals was quickly reversed with both gold and not least silver continuing to attract demand amid a weaker dollar, lower real yields and friction between the world’s two biggest economies.

Bloomberg ci sector

While silver continued to claw back some of its substantial March losses, gold’s resilience was tested once again this past week. The lack of follow-through momentum from the recent breakout to $1765 had left the market nervous and it culminated when the spot price briefly broke below $1700/oz this past week. However, just like the break to the upside failed to attract fresh buying, the break below support was not met by fresh selling.

Instead, support was quickly reestablished as the dollar and bond yields moved lower on increased US-China tensions. Investors continue to view the yellow metal, and recently also silver, as the go-to metals for protection.

While hedge funds, which often trade on the back of a short-term technical price developments, have been rather quiet in recent months, the demand for ETF’s backed by bullion has continued to go from strength to strength. Global holdings in gold-backed ETF’s have risen non-stop for the past six months with assets at a record level above 3,100 tons.

The same goes for silver which, despite its March slump, has seen total holdings rise strongly to reach fresh records on an almost daily basis during the past couple of months.

Having rallied by 50% since that March low at $11.65/oz, the metal has also managed to claw back some ground against gold. The gold-silver ratio, which expresses the value of one ounce of gold in ounces of silver, has recovered from the record 125 level reached in March to the current 98, still well above the five-year average close to 80.

We maintain our bullish outlook for both metals, not least gold now that its premium to silver has narrowed. The main reasons why we cannot rule out reaching a fresh record high over the coming years are:

Gold acts as a hedge against Central Bank monetization of the financial markets
Unprecedented government stimulus and political need for higher inflation to support debt levels.

The inevitable introduction of yield controls in the US forcing real yields lower
A rising global savings glut at a time of negative real interest rates and unsustainably high stock market valuation. Raised geo-political tensions as the Covid-19 blame game begins Rising inflation and a weaker US dollar.

The crude oil rally that emerged following the sub-zero collapse on April 20 is showing the first signs of pausing. This after the WTI futures contract hit $35 resistance and Brent failed to challenge $37.2/b, both levels being the 38.2% retracement of the January to April sell-off. The brief collapse into negative territory last month on the expiring May WTI contract probably was the single biggest contributor to support the strong rally that followed.

The event on April 20 sent a shockwave through the global oil market with producers realizing that something dramatic had to be done in order to rescue the market from even more pain. This probably led to the very strong and rapid compliance that major producers have been exhibiting during May.

In their latest monthly Oil Market Report the International Energy Agency saw global supply drop by 12 million barrels/day in May to reach a nine-year low at 88 million. Demand meanwhile was expected to recover from being down 22 million barrels/day year-on-year in May to down 13 million in June.

Supporting the process has been the rapid and in most cases involuntary reduction in US shale oil production, now estimated by the IEA to reach 2.8 million barrels/day year-on-year in 2020. Previous production cuts by OPEC+ always attracted some level of hesitancy as members of the group risked yielding further market share to producers in North America. That risk evaporated with the slump in WTI as it left many producers out of pocket, thereby forcing them to halt production.

Having potentially reached the consolidation phase, it is worth considering what could trigger renewed weakness. There are several risks with the most relevant being:

Easing lockdowns sparking a resurgence of Covid-19 outbreaks. Whether OPEC+ can maintain the current high level of compliance. Cash strapped US producers desperate to increase production with WTI back above $30/b.
Post-pandemic changes in global consumer habits (less flying and more working from home). A break above $35/b on the July WTI futures contract could signal a potential extension towards $40/b while support should emerge at $30/b. Only a break below $28/b would raise concerns of a deeper correction.

Apart from the risk of a new trade war between the US and China, as well as a weaker-than-expected demand recovery, the oil market focus in early June will once again turn to Vienna where OPEC and the OPEC+ group convene to discuss a path forward. Some concerns that Russia may struggle to commit to current cuts beyond July may once again create some nervousness prior to the June 8 to 10 meetings. This on the grounds that the recovery in crude oil prices so far has primarily been driven by supply cuts, that can easily be reversed, and not yet a solid recovery in demand.Crude Brent Oil

HG crude oil increasingly, just like crude oil, looks like it needs a period of consolidation. Having almost retraced most of its Covid-19 related sell-off in March, the metal is likely to struggle in its attempt to break back above $2.50/lb, a level which provided support but now resistance, since 2017. The National People’s Congress in China, which has just finished, offered fresh stimulus measures that will increase demand for raw materials in key sectors such as construction and transport.

Overall, however, it was not the fiscal bazooka the market has seen during previous downturns. While perhaps stabilizing the outlook it is unlikely to drive a recovery in growth back to the 6% level. For now, traders are holding onto the prospects for a global economic rebound outweighing increased tensions between the US and China.

Corn, a recent favorite short-sell among hedge funds, was heading for its biggest weekly gain since last October. The recent recovery in crude oil has led to increased demand from ethanol producers who normally consumer close to 40% of the US corn production.

Together with the potential short-term threat of hot and dry weather across the US Midwest, the price has moved higher and it now looks like a floor has been established at the key $3/bushel level. Speculators held a net-short of 245,000 lots (31 million tons) in the week to May 19 and continued short-covering could see the contract challenge an area of resistance above $3.40/bushel. Wheat is also finding a weather-related bid while soybeans remain troubled by US-China tensions hurting the prospect for Chinese demand.

crude oil Covid-19 related rollercoaster has gone full circle. After rallying by 25% during March on worries supply from South America would be disrupted the price has since collapse once again.

The prolonged shutdowns around the world have since reduced demand for quality beans from coffee shops and cafés. This week the price broke support and dropped back below $1/lb and well below the current cost of production for many farmers across South America. Something that may get addressed when the International Coffee Organization hold a virtual meeting of its International Coffee Council from June 1.

For a look at all of today’s economic events, check out our economic calendar.

Ole Hansen, Head of Commodity Strategy at Saxo Bank.

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This article is provided by Saxo Capital Markets (Australia) Pty. Ltd, part of Saxo Bank Group through RSS feeds on FX Empire

Silver bought, Gold sold ahead of Breakout

Saxo Bank publishes two weekly Commitment of Traders reports (COT) covering leveraged fund positions in commodities, bonds and stock index futures. For IMM currency futures and the VIX, we use the broader measure called non-commercial.

The below summary highlights futures positions and changes made by hedge funds across 24 major commodity futures up until last Tuesday, May 12. Following a couple of weeks of strong energy-led gains, the Bloomberg Commodity Index traded lower by 1.2% in the week to May 12. In response to this speculator’s cut bullish commodity bets by 9% to 567k lots. Most of the selling was seen in natural gas, Brent crude oil, corn and gold while buyers concentrated their efforts in WTI crude oil, soybeans and live cattle.

Energy

The divergence in speculative interest between WTI and Brent crude oil continued in the week to May 12. The 5% rally in CLM0 attracted another 25k lots of fresh longs with the net rising to 325k lots, the highest since September 2018. Brent crude oil (LCON0) meanwhile traded lower by 3% resulting in the net long being cut by 21k lots to 156k lots. The combined net-long reached a three months high at 481k lots with WTI contributing two-third of the nearly 300k lots funds have added during the past six weeks.

As mentioned in my latest ‘COT, the short-lived collapse to a negative WTI price last month probably saved the market. It helped accelerate dramatic cuts in global production, estimated by the IEA to hit 12 million barrels/day this month. With demand beginning to recover and US producers having made substantial cuts, WTI crude oil has so far been the go to contract for bullish speculators. However, driving the price to high before fundamentals can support a sustained recovery carries the risk of US shale oil producers turning the taps back on to soon.

Natural gas’s failure to sustain a rally above $2/therm helped trigger a 19% correction and a 30% reduction in the net long to 112k lots. The price had rallied strongly from the March low on the outlook for lower production from associated oil production. Milder weather combined with continued lockdowns leading to lower demand and reduced export demand for LNG all helped drive the price lower.

Metals

Gold longs were cut to a fresh 11-month low at 161k lots as the price continued to struggle to break it’s $1700/oz shackle. Silver buyers meanwhile returned to increase the net-long by 35% ahead of the Thursday spike back above $16/oz. The white metal has now retraced more than 61.8% of the February to March collapse thereby attracting renewed demand from speculators who in recent weeks had cut net-longs by 85% from the February peak.

HG Copper traders were the least bearish since January after cutting the net-short by 18% to 13k lots, Further upside however remains doubtful with economic data beginning to show the horrendous damage done to the global economy from many weeks of inactivity. Something that was highlighted by the data showing that the change in position was driven by short-covering and not fresh longs.

Agriculture

Another year of plenty supplies across the three major crops are being projected by the U.S. Department of Agriculture in their latest outlook from May 12. Only a deteriorating weather outlook over the coming months or a pickup in U.S. export sales – unlikely given the strong dollar – can prevent stocks building following another bumper harvest in the U.S. and around the world. Overall the grains sector was net-sold with buying of soybeans (+24k) being off-set by wheat (-0.9k) and not least corn where 24k lots of selling lifted the net-short to a one-year high at 214k lots.

All four soft commodities were net bought despite cotton being the only contract being supported by a higher price. Buying of sugar and coffee occurred despite the headwind from a free falling Brazilian real.

What is the Commitments of Traders report?

The Commitments of Traders (COT) report is issued by the US Commodity Futures Trading Commission (CFTC) every Friday at 15:30 EST with data from the week ending the previous Tuesday. The report breaks down the open interest across major futures markets from bonds, stock indexes, currencies and commodities. The ICE Futures Europe Exchange issues a similar report, also on Fridays, covering Brent crude oil and gas oil.

In commodities, the open interest is broken into the following categories: Producer/Merchant/Processor/User; Swap Dealers; Managed Money and other.

In financials, the categories are Dealer/Intermediary; Asset Manager/Institutional; Managed Money and other.

Our focus is primarily on the behavior of Managed Money traders such as commodity trading advisors (CTA), commodity pool operators (CPO), and unregistered funds.

They are likely to have tight stops and no underlying exposure that is being hedged. This makes them most reactive to changes in fundamental or technical price developments. It provides views about major trends but also helps to decipher when a reversal is looming.

Ole Hansen, Head of Commodity Strategy at Saxo Bank.

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This article is provided by Saxo Capital Markets (Australia) Pty. Ltd, part of Saxo Bank Group through RSS feeds on FX Empire

Another Year of Plenty Awaits the Grain Market

What is our trading focus?

  • WHEATJUL20 – CBOT Wheat
  • CORNJUL20 – Corn
  • SOYBEANSJUL20 – Soybeans

Grain prices are generally trading softer following the monthly release yesterday of the World Agriculture Supply and Demand Estimates report (WASDE) from the US Department of Agriculture.

This was the first report to include projections for ending stocks at the end of the new 2020-21 crop year which runs until August next year. Across the board, another year of plenty of supplies is being projected with only a deteriorating weather outlook over the coming months preventing another bumper harvest in the U.S. and around the world.

Key takeaways:

Corn: Supplies will rise to their highest in 33 years due to massive plantings and what is expected to be a record crop in the 2020/21 marketing year.

Soybeans: The USDA raised its fore forecast of 2019-20 soybean ending stocks to 580 million bushels, up from 480 million last month and above the highest expectations. For 2020-21 the ending stocks was projected to fall to 405 million bushels, below the average estimate.

Wheat: While lowering the projected 2020-21 U.S. ending stocks to 909 million bushels from 978 million this year, it was still well above expectations at 819 million. Adding further pressure to U.S. wheat prices was the a jump in global ending stocks to a record 310 million tons. A recovery in Russian and Australian productions thereby making it harder for U.S. farmers to compete for export orders, unless the dollar should weaken over the coming period.

The uptrend in wheat from the 2019 low is once again being challenged with a break below $5.05/bu on the continuation chart signalling an extension to the next key level of support at $4.91/bu, the March 17 low.

Corn meanwhile remains stuck near a 13-year low with support at the psychological important $3/bu level so far holding. The price has struggled amid the outlook for another bumper crop emerging across the U.S. plains together with stiff competition from producers in Argentina and Brazil both reaping the benefit from much weaker currency. Adding to the recent weakness has been the collapsing oil price as it has cut demand from ethanol producers who normally account for one-third of U.S. demand.

Soybeans has been trading sideways for the past two years with the price struggling to move higher from a near 12 year low around $8/bu. Worries about Chinese demand as the Covid-19 blame game heats up and the mentioned competition from exporters in Brazil and Argentina are two of the main obstacles keeping the price down.

Ole Hansen, Head of Commodity Strategy at Saxo Bank.

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This article is provided by Saxo Capital Markets (Australia) Pty. Ltd, part of Saxo Bank Group through RSS feeds on FX Empire

Organic Soybean Acres Planted are Likely to Rise

 

Organic soybean planting is likely to rise related to organic corn planting during the coming harvest according to The Jacobsen. This is because the average value per acre for organic corn has declined substantially relative to the value per acre for organic soybeans. The relative value is measured by The Jacobsen Planting Acre Index.

The Jacobsen planting acre index is beginning to consolidate at 4-year lows. The index calculates the theoretical value of an acre of organic corn relative to the theoretical value of an acre of organic soybeans. The assumptions used are based on the Jacobsen calculation of the average yield per bushel in the Midwest for both organic corn and organic soybeans. The index ignores any additional costs for switching and any additional costs of planning organic corn compared to organic soybeans.

After hitting a higher of more than $800 per bushel in August of 2018 (which coincides with the 4-year high of organic corn prices The JacobsenPUATF), the index has declined by more than $500 per bushel and is hovering below $300 for the first time in the past 4-years.

The low level of the index means that the strong demand for soybeans and the lack of supply during the 2019/2020 season, makes organic soybeans a good option in the rotation despite the value being lower than the value of an acre of organic corn in the mid-west.

Prices Remain Stable

Organic corn prices are stable with little to no activity in the spot market hovering around $7/$7.1 picked up at the farm in the mid-west. Some merchandisers are now quoting $7 delivered into their mid-west facilities. This could put additional downward pressure on prices. Organic corn prices in South Central PA remain near $350 per short-ton delivered for new crop, and slightly below for spot. Organic soybean prices are hovering just above $20 per bushel, but there is little product around. Organic soybean meal prices are hovering near the $760 level mid-west, and have similar values in PA.

Organic Corn Prices Might be Driven by the COVID-19 Spread in Turkey

Organic corn prices could experience upward momentum driven by a shutdown in Turkey. Organic corn prices have been trading under pressure but have been steady of late according to The jacobsen. This comes as the convention corn market implodes. Conventional corn prices on the CBOT broke down today and are poised to test 4-year lows at $3 per bushel. For organic corn traders, the outlook remains bleak, but there is a fly in the ointment that could buoy organic corn prices.

According to reports, Turkey is on shaky ground, as fast-rising coronavirus cases threaten to plunge an already fragile economy into further despair. Turkey is one of the few European countries that have yet to implement a nationwide lockdown, in favor of keeping their economy going. Unfortunately, Turkey is in a particularly bad place to weather a pandemic. Self-isolation is voluntary throughout the country but non-essential business is closed.

Reports show that Turkey began to see an acceleration in COVID-19 cases that increased to 4,000 cases per day as of April 8. The first case of COVID-19 was reported on March 11. Total cases are now more than 65,000.

What a Shutdown in Turkey Would Mean

A shutdown of Turkey’s economy and its ports would likely have a significant impact on the US organic corn market. During the balance of the 2019/2020 season, based on historical deliveries, the US is expected to receive approximately 4.3-million bushels of organic cracked corn imported into the United States from Turkey.

If these shipments, which are scheduled from May to September, do not arrive, then the overhang of organic corn, which remains in storage will evaporate. In turn, this could push prices higher. The carryover, which is now expected to be more than 2-million bushels, according to The Jacobsen, would completely disappear. You can see our forecast based on these projections on The Jacobsen weekly market intelligence.

Organic Retail Demand is Expected to Rise

Organic retail demand is predicted to rise during the balance of the 2019/2020 season according to the Jacobsen insight. A strong tailwind lead by increased demand for food purchased at supermarkets and big-box stores will buoy demand. The rapid shift in US short term interest rates, in conjunction with the fiscal policy, will help further catapult purchases of organic goods when pent up demand is unleashed and the coronavirus fades. This should help buoy organic grain prices including organic corn prices and organic soybean prices.

Social distancing is poised to buoy demand for retail organic food. Supermarkets in impacted coronavirus areas are having a tough time holding on to consumer staples like water, and meat, that can be frozen. While there might be a pause in demand as this scenario fades, strong monetary and fiscal policy will buoy demand. The last time US interest rates were dropped to zero, they stayed there for 7-years.

Fiscal and Monetary Policy Boost

The White House announced several fiscal stimulus policies as well as formulated a policy on social distancing. They are requesting social distancing for the next 15-days. This will likely buoy demand for organic proteins including eggs, dairy, and chicken. While there will likely be a dip initially when things “go back to normal”, the stimulus in the economy should allow for an upgrade cycle for those who might consider organic as a choice over conventional. The fiscal policy in conjunction with the powerful monetary policy should help accelerate growth in the Q4 of 2020 into the Q1 of 2021.

Organic Corn Prices Break Below the $8 Level; Poised to Test 2016 Lows

Organic corn prices mid-west picked up at the farm have dropped below $8 per bushel level. Prices for spot loads are trading near $7.75, as farmers are clearing out their bins ahead of the planting season. There appears to be a concerted effort in the mid-west to purge spot organic corn, and consumers are lower their bids.

Merchandisers have quoted prices in the South-Central PA region at $10.65 per bushel for Q4, and with approximately a $2.5 freight and loading charge to reach the mid-west, Q4 prices should be trading near $8.15 for the Q4. Organic corn prices are poised to test support near the 2016 lows at $7.40.

There is a combination of issues that are dragging on prices. First, most consumers are covered for the balance of Q1 and Q2 fo 2020. There is plenty of corn around, in bins, looking for a home. Additionally, a decent quantity of the organic corn this year has a test weigh below 54. While some merchandisers will accept organic feed corn #2 at a 52-test weight with a discount (of approximately 5 cents per pound), others are rejecting the corn which is creating additional headwinds for prices.

There also appears to be strong demand for organic corn with test weights that would place it at #1, which is 56 and above. The Jacobsen has heard that there is a robust premium for #1 organic corn which could be up to $1 per bushel. This would be used to mix with lower test weight corn to achieve 54 test weight.

There is also an accelerating number of farmers concerned that there could be too much precipitation again in 2020. Their concern stems from a recent report from the National Weather Service who is warning there is a high risk of flooding again this spring in the mid-west especially in areas that are still saturated. Additionally, farmers are concerned that levee fixes will not take place expeditiously, which will buoy insurance premiums for affected areas.

 

Grain Futures Update – 12/20/2019

With the Phase One Trade Deal signed, Stephen discusses how China will impact the grains through the use of monthly charts.

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The risk of loss in trading futures and/or options is substantial and each investor and/or trader must consider whether this is a suitable investment. Past performance, whether actual or indicated by simulated historical tests of strategies, is not indicative of future results. Trading advice is based on information taken from trades and statistical services and other sources that believed to be reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades.

Corn Prices Hit A 5 Week High, Will Cotton Prices Break The 70 Level?

I will be recommending a bullish position if prices close above 3.85 while then placing the stop-loss at the contract low which was hit on September 9th at 3.65 as the risk would be $1,000 per contract plus slippage and commission as the chart structure is outstanding due to the low volatility that we have experienced over the last several months.

Corn prices are now trading above their 20 day moving average but slightly below their 100 day which stands at major resistance at 3.91 as the USMCA trade agreement will be passed this week as that is a very bullish fundamental factor coupled with the fact that the Chinese trade agreement has been written in stone as I think the bottom has occurred in the grain market as these are very bullish factors for corn prices which still historically speaking are depressed.

The large money managed funds are heavily short corn while adding another 30,000 contracts last week as they believe lower prices are ahead, however I disagree with that situation so play this to the upside as the risk/reward is in your favor.

TREND: HIGHER–MIXED 

CHART STRUCTURE: EXCELLENT

VOLATILITY: INCREASING

Cotton Futures

Cotton futures in the March contract is currently trading higher by 45 points at 67.25 reversing some of the losses that we witnessed last Friday as prices are still hovering right near a 5 month high.

The large money managed funds are still short this commodity by 3,000 contracts as they still believe lower prices are ahead, however I have been recommending a bullish position from around the 66.60 level and if you took that trade continue to place the stop loss under the November 21st low of 63.70 as an exit strategy as the chart structure will start to improve in next week’s trade therefor the monetary risk will also be reduced.

Cotton prices are trading above their 20 & 100 day moving average telling you that the trend is to the upside with the next major level of resistance around the 68.00 level as I think that could be tested in this week’s trade as optimism that China will become a more active buyer of U.S cotton should be supportive in the coming weeks ahead.

At the current time I have several bullish recommendations as I think the commodity markets in 2020 will have significant rallies from these depressed levels as I do think with the emergence of all these trade deals occurring the bearish situation has ended as the risk/reward is in your favor to the upside.

TREND: HIGHER

CHART STRUCTURE: EXCELLENT

VOLATILITY: INCREASING

This article was written by Michael Seery (CTA—COMMODITY TRADING ADVISOR)  www.seeryfutures.com

Corn Higher On Possible Trade Agreement

However, President Trump announced today that a possible trade agreement with China could be at a hand pushing prices higher.

One very bullish fact is that the USMCA agreement looks to be at hand in the coming months ahead as Mexico is our largest importer of U.S corn in the world as we need some bullish fundamental news to push prices higher in my opinion.

Heading into 2020 I think the commodity markets will surge to the upside as they are certainly depressed especially compared to how strong the U.S economy is and if you take a look at the equity market they have hit another all-time high in today’s trade as President Trump I believe will continue to inflate all asset classes in the coming years ahead.

If you are a farmer I certainly would not be selling at these price levels as demand will come back for this product in the coming months ahead as I want to play this to the upside as the downside is very limited in my opinion.I am will be looking at a possible bullish position if prices break the 4 week high which was created on December 3rd at 3.85 while then placing the stop loss under the contract low which was hit on September 9th at 3.65 as the risk would be around $0.20 or $1,000 per contract plus slippage and commission.

This article was written by Michael Seery (CTA—COMMODITY TRADING ADVISOR)  www.seeryfutures.com

Negative Week for Grain Prices Due to Weather and Optimism in Trade

Grains such as soybeans, corn, and wheat are trading with a negative note on Friday as investors are closing positions ahead of the weekend. Agricultural futures are ready to close the week with losses.

Soybean contracts down for the second day

ZS1 Soybean Futures 1-hour chart Sept 6
ZS1 Soybean Futures 1-hour chart Sept 6

Soybean is trading in consolidation mode after the deep decline performed on Thursday. Investors are trading in profit-taking mode ahead of the weekend.

On Thursday, soy was rejected by the 8.80 area, and it fell 1.60% to close at 8.61. On Friday, the grain attempted a recovery, but the dovish pressure was too intense, and it is now trading 0.12% down.

On the week, soybean is ready to close its third negative week in the last four, this time with a drop of 0.80% in the period. The unit has been trading in a range between 8.62 and 8.80 for a month.

Technical indicators are suggesting more room for the downside. However, the mentioned 8.62, and the 8.45 area are containing the unit.

Corn breaks below 3.56 and trades at near 4-month lows

ZC1 Corn Futures 1-hour chart Sept 6
ZC1 Corn Futures 1-hour chart Sept 6

Corn is trading negative on Friday after a brief period of consolidation on Thursday. However, the picture is really dovish and even more now that the pair broke below the 3.56 support and is trading at 3.55, its lowest level since May 13.

Currently, futures of corn are trading at 3.56, 0.63% negative on the day. Technical conditions remain bearish for the unit with the 3.50 and 3.40 areas as next support zones.

On the week, corn resumed its free-fall from 3.76 after the recovery performed the previous week. This time, corn contracts are falling 3.60% on the period. The technical picture is also very dovish.

Wheat stops two days of gains and falls on Friday

ZW1 Wheat 1-hour chart September 6
ZW1 Wheat 1-hour chart September 6

Wheat is trading down on Friday as investors are taking profits ahead of the weekend and after two days of gains. The grain is trading 0.75% down at 4.62, and it is heading to test the 4.60 area.

On the week, futures of wheat are fighting to close the period in positive, but the odds are against it as technical indicators are suggesting more declines before the end of the session. Wheat is trading 0.05% negative on the week.

Coffee on consolidation mode below 100.00

Futures of coffee has been trading in a small range between 95.00 and 98.00 during the whole week. Consequently, the unit is posting a weekly decline, but the drop is not that much. Coffee contracts have declined 1.50% in the week.

Soybeans, Corn Collapsed After a Good AMIS Report

Grains such as soybeans, corn, and wheat are trading down on Thursday as investors are digesting the latest AMIS crop report and optimistic news about new trade talks.

The market sentiment improved considerably on Thursday. Investors welcomed the announcement of a new round of trade talks between the United States and China in October.

However, a new crop report showing that forecast for supply in grains was lifted sharply, “mostly reflecting a massive upward revision for the US,” pushed prices down.

According to the Agricultural Market Information System market monitor for September, “world maize production has been lifted sharply in view of a massive upward revision for the US. Rice production is also seen higher while wheat production is expected to increase to a record. In the case of soybeans, a projected year-on-year decline in output is unlikely to become a concern, as overall supplies remain adequate, especially given the dampening impact of African Swine Fever on feed demand in China.”

AMIS highlighted that money managers liquidated long positions in wheat and corn, “establishing modest short holdings for both.” However, in the case of soybeans, “it added to its net short position m/m.”

Soybeans down on Thursday and lost two days of gains

ZS1 Soybean 1-hour chart September 5
ZS1 Soybean 1-hour chart September

Futures of soybean are trading down on Thursday as investors are digesting the latest AMIS report. Improving supply expectations and long position liquidations are pushing prices lower.

Early in the day, soybeans traded higher to 8.78, intra-day high. But the news and a rejection of that level sent the unit down to 8.65. The contract of soy is now priced at 8.65, which is 1.10% negative on the day.

Technical indicators are suggesting more declines in the short and middle term. The next support is at 8.63, followed by the 8.60 area. Be aware of stop-loss triggering below 8.60.

Corn consolidates losses around 3.59

ZC1 Corn 1-hour chart September 5
ZC1 Corn 1-hour chart September 5

Corn is trading positive on Thursday for the first time in the last five sessions as investors are digesting the AMIS report.

“In the US, the crop is progressing under mixed conditions across much of the corn belt due to the late sowing this season,” the report says. “Final yields will depend on how the weather performs over the next month.”

In this framework, futures of corn attempted to bounce from 3.56 per bushel, but the 3.61 level contained the unit. Corn is now trading 0.10% positive on the day at 3.58, but it is losing steam.

Wheat posts second day of gains, but it stopped its advance

ZW1 Wheat 1-hour chart September 5
ZW1 Wheat 1-hour chart September 5

Wheat is performing its second day of gains on Thursday, but recent crop report news hurt the unit and it pared gains at 4.69.

The unit is now trading at 4.66, 1.03% positive in the day. Oscillators are suggesting a turn in the direction for the unit, but the 4.64 is supporting the contract. Watch out for the 4.60 area, followed by the 4.56 and 4.50 levels for supports.

Grains Mixed on Better Crop Conditions and Hopes for US Grains Demand

Soybeans, corn, and wheat are trading mixed on Wednesday as grain investors are digesting news from the USDA regarding crop ratings and US grain exports.

Soybeans higher amid robust export inspections

ZW1 Wheat futures 1-hour chart September 4
ZW1 Wheat futures 1-hour chart September 4

Soybeans are trading positive for the third day in a row, but the movement remains in a small range between 8.60 and 8.80. Investors welcomed news about an increase in export inspections.

The U.S. Department of Agriculture reported they inspected 1.28 million metric tons of soybeans for overseas delivery between August 23 and 29, which was a 33% increase from the previous seven days and also an increase from the 776.277 metric tonnes reported in the same period of 2018.

Soybean investors are taking the news as a signal that the demand from U.S. supplies has started to grow again.

Besides, the weekly crop report was released and showed that soybeans crop remained unchanged with a 55% rated good/excellent, which is considerably lower than the 66% a year ago. Soybean blooming and pods are also below five-year averages.

In that framework, futures of soybeans attempted a decisive run overnight, but the unit was capped at 8.74. Then, it started to fall to current levels around 8.69. Soy is currently flat on the day.

However, the odds have changed for soybeans as technical indicators are signaling a bullish extension is gaining momentum in the daily chart. The positive sentiment is even more prominent in the 1-hour chart with oscillators and moving average pointing to the upside too.

If the pair holds above the 8.68, it will recover until the 8.74 again. Then, 8.78 is waiting for the unit.

To the downside, below the 8.68, soybean contracts will find buying interest at 8.62 and 8.60.

Corn extends decline for the fourth day

ZC1 Corn futures 1-hour chart September 4
ZC1 Corn futures 1-hour chart September 4

Futures of corn are trading lower again on Wednesday as investors crop conditions have improved in the last week. Corn is now heading to test August 14 low at 3.58.

Corn crops were rated 58% good or excellent, above the 57% condition the previous week. According to the USDA, corn was in dough stage at 81%, well below the 93% in the five-year average.

Earlier in the day, corn was trading slightly positive, but after failing at the 3.63 level, it started to fall and it broke Tuesday’s lows at 360 and extended drops to the current 3.59. Corn is now 0.50% negative in the day, trading at lows of the session.

Technical indicators suggest that the unit is oversold so that a brief bounce could be expected. However, both the 1-hour and the daily chart suggests more dovishness.

If corn consolidates levels below 3.60, next support will be at 3.58, followed by 3.55 and 2.50. Any potential upside will need the unit to break above 3.63.

Wheat pared gains at 4.60, back to test 4.55

ZW1 Wheat futures 1-hour chart September 4
ZW1 Wheat futures 1-hour chart September 4

Futures of wheat are showing some signal of being alive with its first positive session in the last five trading days. On Wednesday, wheat is consolidating losses after the declined performed since August 28 high around 4.78.

The USDA reported that U.S. spring wheat harvest is 55% completed, well above the 78% average by this time in the previous five years.

Early in the day, wheat tested the 4.60 in an attempt to recover more ground from Tuesday minimums at 4.50. However, the unit was rejected by the 4.60 area, and contracts were sent to be traded at 4.55.

The unit is still 0.45% positive in the day, but technical indicators are signaling that the upside recovery is not too active. A retest of the 4.50 area is expected unless the unit breaks above the 4.60 resistance.

Soybeans, Corn down; Wheat at 4-month lows

Corn, soybeans and other soft futures such as wheat are trading down on Monday as investors are digesting the last set of tariffs on Chinese products, improved weather and supply conditions.

Soybeans start trading with a negative gap

ZS1 Soybean 1-hour chart September 3
ZS1 Soybean 1-hour chart September 3
ZC1 Corn 1-hour chart September 3
ZC1 Corn 1-hour chart September 3

Futures of soybeans are trading negative on Tuesday as investors are digesting improved weather forecast and concerns amid the trade war and the new set of tariffs that the United States put on play Sunday.

Soybeans are currently trading 0.60% negative in the session after opening the day with a negative gap at 8.66. Then, the unit fell to be bought as cheap as 8.59, where it found support. It is now at 8.64.

Technical indicators suggest more room for the downside with Momentum, Awesome Oscillator and MACD signaling bearish conditions in the 1-hour chart.

However, in the bigger picture, soybeans are trading in a range between 8.55 and 8.80.

Soybean investors were slightly less dovish last week as the CoT showed that net short positions were declined to 75,551 in the August 27 week from 76,820.

Corn falls for the third session and tests the 3.64 area

ZW1 Wheat 1-hour chart September 3
ZW1 Wheat 1-hour chart September 3

Corn is trading negative for the third session as the unit is testing the 3.64 area as investors are digesting improved weather conditions in the last days.

According to the CoT report, investors increased their net-short positions in corn to 96,370 in the week of August 27, the highest level in three months. Up from 82,266 the previous week.

So, with investors betting on lower prices, Corn futures look ready to break below the 3.64 area. Besides, technical indicators in the 1-hour chart are also signaling for more drops in the next few hours.

Below 3.64, corn will find support at 3.63 and then 3.60. Finally, the grain would open the door for a retest of the 3.58 area, August’s lows.

Wheat extends decline to lowest since May 16

Futures of wheat are trading down for the fourth negative day as investors are digesting reports of abundant global supplies. However, the CoT report showed that net short contracts declined to 37,330 for hard-red winter futures contracts in the week of August 27, down from 40,404 the previous week.

The trend in futures of wheat is clearly bearish with the unit extending declines steadily from the 4.77 area traded on August 29. Earlier in the day, the unit broke below the 4.62 area and after a small pullback, it extended loses to test the 4.56 level.

Currently, Wheat futures are trading at 4.57’6, which is 1.05% negative on the day. In the one-hour chart, technical indicators are mixed with oscillators going north but Momentum and moving averages signaling for more drops. So, a brief period of consolidation is expected around 4,58, but the big picture remains bearish.

Wheat will see next support at 4.53, then, 4.50 and the 4.30 area. To the upside, ZW1! is contained by the 4.60 area and then, 4.62 will act as resistance.

Grains to Close Week, Month With Losses, All About Trade War

Grains are trading mixed on Friday but with a negative note on August as investors are still waiting for trade war developments. As for now, conciliatory words between US and China are giving some hopes.

“The most important thing is to create the necessary conditions for continuing negotiations, said Gao Feng, a spokesman for China’s Commerce Ministry. However, he said that China has an arsenal of measures for retaliation. However, they don’t want to use it.

Despite the conciliatory tone, the market is reluctant to believe in everything China and the United States said, as it seems they want to have a prolonged trade war. Farmers, then, are suffering the consequences.

Soybean ready to close August with gains

ZS1 Futures of Soybean 1-hout chart August 30
ZS1 Futures of Soybean 1-hout chart August 30

Soybeans are trading positive for the third day in a row as investors welcomed conciliatory feeling between the two parts involved in the trade war. On Friday, futures of soybeans jumped to trade as high as 8.78 per bushel, but the level resisted and it sent the unit back to previous levels.

Profit-taking ahead of the end of the week and month is keeping the grain out of higher prices. Currently, soybean is trading 0.60% positive on the day at 8.73.

On the technical analysis front, odds are for a bullish extension in the short and middle terms as studies on both, the 1-hour and daily charts, are pointing to the upside.

On the week, soybean is closing the first positive period in the last three weeks. The oilseed is posting a 2.10% weekly gain, recovering almost all losses experienced in the previous two weeks.

In the monthly chart, soybean is closing August with a 0.63% gain as the unit was on time to reverse losses in the first half of the month, but the benefit is not that big. August would be the third month of gains in the last four. The monthly chart also suggests that the grain is moving in a long term range between 8.44 and 9.30.

Corn down amid profit-taking

ZC1 Futures of Corn 1-hour chart August 30
ZC1 Futures of Corn 1-hour chart August 30

Corn is trading down for the second day as investors are closing positions ahead of the end of the month. Early in the day, the contract attempted to break above the 3.74 level, but it wasn’t successful.

Currently, corn is trading 0.40% negative at 3.69. The unit is now testing the 3.69 area, which is the support that is containing the downside. Below there, the next frontier would be 3.66.

On the week, corn is giving signals of life as the unit is performing its first period of gains after the sell of experienced in the last three weeks. Thought the move is on a consolidation phase rather than a recovery.

The month is also an ugly picture for corn as it is closing its third negative period. The unit has now entered on full steam into the long term range traded between July 2014 and May 2019 between 3.40 and 4.00.

Wheat breaks below 4.62 and trades at lows since May

ZW1 Futures of Wheat 1-hour chart August 30
ZW1 Futures of Wheat 1-hour chart August 30

Futures of wheat are trading negative on Friday with the unit breaking below the 4.62 area and extending drops to 4.59, its lowest level since May 16.

Previously in the day, wheat traded around 4.66, but a break below the 4.64 triggered stop losses that fueled declines to 4.62, where another batch of stop losses was activated. Then, the unit found support just below the 4.60 area.

Currently, the unit is trading at 4.60, 2.50% negative on the day.

On the week, the unit is falling 3.50%, extending losses after the previous week small recovery.

On the month, wheat is falling for the second period, with August performing 5.28% down in the period. Overall, wheat is inside a downtrend with the 4.20 area as the most likely destiny.

Grains roundup for August 30

Coffee is down in the day, week, and month as futures of coffee weren’t able to break above the 98.00 area. The contract is now traded at 95.25, 2.15% down. On the week, coffee is 0.11% down after attempting a recovery that was capped at 98.50. In the bigger picture, coffee is closing August with a 3.25% decline, extending the already sell-off of 10.30% of value performed in July. Technical analysis suggests more declines in all frame times.

ZC1 Futures of Coffee 1-day chart August 30
ZC1 Futures of Coffee 1-day chart August 30

Sugar is having the same story of coffee with declines in the day, week, and month. The trend in the sugar futures is even more visible to the downside with prices at 11-month lows around 11.10. The unit is closing its fifth negative week in a row, and its second month with red numbers in a row. August is 8.20% negative for sugar.

SB1 Futures of Sugar 1-day chart August 30
SB1 Futures of Sugar 1-day chart August 30

Happy weekend and stay safe!

Soybeans Extend Gains, Wheat Down but Signaling a Bullish Recovery

Corn, Soybeans, and other softs futures are trading mixed as investors are booking profits ahead of the end of the month. Besides, grain traders are watching weather conditions in the Midwest of the United States.

Soybeans positive for the second day

ZS1 Soybeans 1-hour chart August 29
ZS1 Soybeans 1-hour chart August 29

Futures of soybeans are trading positive for the second day as investors are trading in a mix of profit-taking ahead of the end of the month, good news in the trade war and improving crop reports.

Soybeans accelerated in the last few hours to break above the 8.68 short term resistance, and it is now trading at 8.70, its highest level since August 26. Improvements in the trade war and new commercial options for US grains lifted the unit.

Currently, the oilseed is trading 0.40% positive on the day at 8.69, and the 8.70 area is working as a strong resistance. Technical indicators are still slightly bearish, but RSI and MACD are suggesting a short term bullish continuation. So, traders could expect an 8.72 test in the case the unit breaks above the 8.70 level.

Above 8.70, check for the 8.80 and 8.90 as possible buying zones.

Wheat down for the second day after performing a brief bullish recovery

Wheat is trading negative on Thursday as the unit was unable to break above the upper side of the range it has been trading in the last two weeks.

With a range between 4.66 and 4.77 acting as frontiers, wheat remains to trade in consolidation mode ahead of the end of the month, possible profit-taking and more developments on the trade war.

As reported yesterday, wheat was turning positive in the short term from sub 4.70 levels; however, it respected the range earlier on Thursday and it capped the grain’s recovery. After testing the 4.77 area, wheat was sent down to check the 4.72 area.

Now, the 1-hour chart is showing technical indicators suggesting more room for the downside, where the 4.70 area would be waiting for the pair for a new test.

In any case, remember that range’s bottom side is at 4.66, which will act as support in the case the grain flies to that part of the chart.

Corn extends recovery

ZC1 Corn Futures 1-hour chart August 29
ZC1 Corn Futures 1-hour chart August 29

Corn is trading positive for the second day as investors are closing positions ahead of the end of the month.

On Thursday, corn rallied from 3.64 intra-day low to trade as high as 3.74, its highest level since August 22. Then, the unit felt vertigo, and it started to fall to more moderate prices. It is now trading 0.40% positive at 3.72.

The 1-hour chart is now showing an increasing bearish sentiment backed by the MACD and RSI technical studies. Immediate support is at the 3.71 area, then, 3.69 and 3.66 are the levels to watch.