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. 
Enlarge

Selected highlights:

Enlarge
Source: Bloomberg, Saxo Bank

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. 

Enlarge
Source: Saxo Bank

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. 

Enlarge
Source: Saxo Bank

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.

Enlarge
Source: Saxo Bank

You can access both of our platforms from a single Saxo account.

Disclaimer

Saxo Capital Markets (Australia) Pty Ltd prepares and distributes information/research produced within the Saxo Bank Group for informational purposes only. In addition to the disclaimer below, if any general advice is provided, such advice does not take into account your individual objectives, financial situation or needs. You should consider the appropriateness of trading any financial instrument as trading can result in losses that exceed your initial investment. Please refer to our Analysis Disclaimer, and our Combined Financial Services Guide and Product Disclosure Statement. All legal documentation and disclaimers can be found at https://www.home.saxo/en-au/legal/.

The Saxo Bank Group entities each provide execution-only service. Access and use of Saxo News & Research and any Saxo Bank Group website are subject to (i) the Terms of Use; (ii) the full Disclaimer; and (iii) the Risk Warning in addition (where relevant) to the terms governing the use of the website of a member of the Saxo Bank Group.

Saxo News & Research is provided for informational purposes, does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. No Saxo Bank Group entity shall be liable for any losses that you may sustain as a result of any investment decision made in reliance on information on Saxo News & Research.

To the extent that any content is construed as investment research, such content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication.

Please read our disclaimers:
- Full Disclaimer (https://www.home.saxo/en-au/legal/disclaimer/saxo-disclaimer)
- Analysis Disclaimer (https://www.home.saxo/en-au/legal/analysis-disclaimer/saxo-analysis-disclaimer)
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)