Grain markets have seen aggressive selling almost every week since early January, making for a difficult start to 2024. The funds managed accumulated vast short positions in the corn and soybean markets.
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Managed money trading has been net short in corn for seven consecutive weeks, with an additional 16,597 contracts sold in the last week alone. This brings their short position to just over 314,000 contracts, the largest since May 2019 and the second-largest short position ever reported.
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Managed money has been in a short cone for the past 33 weeks. This is the second-longest stretch they’ve had with a net shortstop. The only longer period was 54 weeks from August 2019 to August 2020.
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Managed money has been net short in soybeans for the past 13 consecutive weeks, and the soybean market is not immune to fund selling. They were sellers of 4,200 contracts last week alone, bringing their net short position to 134,500 contracts, the largest since May 2019.
History shows that funds will reduce or even liquidate this short position at a time when everyone in the industry is talking about it. Hopefully, the fact that their funding shortfall is near a record indicates that it’s nearing time for them to exit.
Index funds go long
On the positive side, index funds continued to add ag periods last week, adding 19,504 contracts, bringing the length of the ag space to 1,052,588 contracts. This is their largest long position in the past six months. They have been buyers for three consecutive weeks and six of the past seven weeks.
The USDA outlook form released last week added to the negative tone in the market. Regarding the corn balance sheet, 2024-25 ending stocks are expected to be a whopping 2.532 bb, with an equity ratio of 17%, the highest since 1987.
The USDA Outlook Forum corn ending inventory forecast has exceeded the ending inventory forecast in five of the past seven years. Don’t be discouraged. As the saying goes, there will be a lot of water under the bridge before the final closing inventory is determined. The outlook form lowered the corn acreage estimate by 3.6 million acres from last year. Considering the cost of inputting this year’s crop and the current pride, even this may be too high.
Ending soybean inventories are projected to be 435 million bushels, up from the current ending inventory forecast of 315 million bushels. In 12 of his last 16 years, the historical forum’s ending inventory forecast exceeded the final ending inventory.
Weather will be a key factor in whether we can participate in a forum that can achieve national yields of 181 bushels per acre. 52.0 bpa is achievable for corn yields and 52.0 bpa for soybean yields. The acreage planted in the United States, which is experiencing drought conditions, is lower than last year. However, Iowa is still dealing with abnormally dry to severe drought, resulting in a lack of subsoil moisture.
see south america
Over the coming weeks, Trade will continue to monitor export sales and South American weather on the Daily Export Telegram. Currently, we are price competitive with South America in corn, but not in soybeans.
This is a time when soybean export sales to South America are likely to be lost due to increased harvests. Brazil’s soybean harvest rate reached 32%, up from 23% last week and ahead of last year’s 25% pace. Michael Cordonnier lowered Brazil’s production forecast by a further 2 mmt to 145 mmt, lower than Konab’s estimate of 149.2 mmt and the Agriculture Ministry’s estimate of 156 mmt.
Brazil’s first corn crop was 29% harvested as of last Friday. Safrinha planting rate reached 59%, an increase of 21% for the week and well above last year’s 40% pace.
moving average indicates low
On the technical side, pay attention to the 10-day moving average and the 20-day moving average. In the current downtrend market, traders are selling against these moving averages. If the market closes above both of these averages, it could indicate that at least a temporary low has been recorded. The red line is the 10th and the blue line is the 20th.
If you have any questions or would like specific operational recommendations, please feel free to contact me directly at 815-665-0461 or anyone on the AgMarket.Net team at 844-4AGMRKT.
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