It’s more appropriate to call the USDA report non-bullish than bearish. Everyone knew the crop would be huge, that was no real surprise. Still, the market broke aggressively. Where does that leave us?
With Beans and Corn holding the overnight lows from Sunday night, and beans finishing positive on the day, its fairly safe to think that the lows are in, at least temporarily. Despite the “trade war” we still know the demand for Beans and Corn are high. While the increased ending stocks will temper prices in the short term, the first sign of issues next year will remind the market that in the current demand atmosphere, the ending stocks will never be high enough to provide an adequate cushion.
Wheat is another story. With their recent run-up, they needed a bullish report to continue the push higher. The demand isn’t there the same way we see it in the other ags. Not only that, but they managed a rally to new yearly highs before the number, something that Corn and Beans were unable to even come close to.
If we look at the manged money picture, we can see funds are still fairly long Wheat. While we don’t like to call the beginning of the selling, after 2 solidly down days, we can safely assume that funds have started to liquate part of their longs. Most likely that trend will continue until they reach a flatter position.
Beans funds are sitting still a bit short, not a massive position though. There is really no movement in the funds recently and given the reports, the huge crops, and the seasonal trends, there is no reason for them to start covering yet.
Corn is a different story than either of the other two. We have seen fund movement pushing to liquate from a position of short near 100k. We see the trend is towards covering shorts and moving towards a more neutral position. Its hard to speculate on the reason why, but its happening, and something to be aware of. It should keep the downward pressure in check as we would expect funds to buy on the dips.