Quarterly Outlook
Q3 Investor Outlook: Beyond American shores – why diversification is your strongest ally
Jacob Falkencrone
Global Head of Investment Strategy
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WASDE surprise sends market sharply lower
Ole Hansen
Head of Commodity Strategy
The three major crops of corn, soybeans and wheat all reacted negatively to the September World Agriculture Supply and Demand Estimates report from the US Department of Agriculture. Chicago corn tumbled by almost 4%, the biggest daily decline since April, after the report raised its yield forecasts to a new record of 181 Bu/acre, thereby sending production above what analysts had been expecting.
The report also confirmed a bumper soybean crop which together with Chinese import tariffs are expected to leave a record 845 million bushels in storage by the end of the 2018-19 season. Chicago wheat, meanwhile, was sent lower after the USDA unexpectedly raised Russia’s outlook. This helped lift world ending stocks above what was expected. Cotton also traded lower after production and stocks received a bigger-than-expected boost.
The report also confirmed a bumper soybean crop which together with Chinese import tariffs are expected to leave a record 845 million bushels in storage by the end of the 2018-19 season. Chicago wheat, meanwhile, was sent lower after the USDA unexpectedly raised Russia’s outlook. This helped lift world ending stocks above what was expected. Cotton also traded lower after production and stocks received a bigger-than-expected boost.
Selected highlights:
CBOT Soybeans are currently stuck in a tightening range between two trendlines with resistance at $8.50/bu and support at $8.20/bu. In the week to September 4, leveraged funds held a net-short of 63,000 lots which is well below the three-year of a net-long of 45,000 lots. With most of the price-negative news priced in and with US-China trade war showing signs of de-escalating the upside could potentially begin to attract some attention.
CBOT corn has been rangebound since June between $3.4/bu and $3.75/bu. Leveraged funds holds a net-short of 57,000, which is in line with the three-year average.
CBOT Wheat is also caught in a tightening range determined by two trendlines. Support at $4.94/bu which is also the August low while resistance is found at $5.25/bu. The troubled season outside the US helped drive a big jump in the leverage fund long during the past few months. This is currently creating some headwinds while sellers will be looking to trigger long-liquidation on a break below support.
Leveraged funds held an elevated long of 43,000 lots in the week to September 4, close to a six-year high and well above the three-year average of a 70,000-lot net-short.
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