Today's edition of the Saxo Morning Call features the SaxoStrats team discussing the continuing weakness of the US dollar as commodity prices recover ground and in the wake of key US equity indices hitting all-time highs Thursday.
Article / 12 September 2017 at 11:59 GMT

Grain traders look to WASDE for direction — #SaxoStrats

Head of Commodity Strategy / Saxo Bank
  • WASDE report due at 1600 GMT
  • Funds have sold nearly 350k lots since last update
  • Downward revisions expected in soybean, corn production

Traders expect downward revisions from today's WASDE report, particularly in soybean and corn production/yield figures. Photo: Shutterstock

By Ole Hansen

The United States Department of Agriculture will release its monthly supply and demand update later today at 1600 GMT. The August WASDE (World Agriculture Supply and Demand Estimates) report helped send all three major crops lower when the government raised yield and production estimates by more than expected. 

Wheat and corn have both been in downtrends since early July as the weather scares seen at the beginning of the growing season started to fade and funds got caught to long in the market. Soybeans have benefited from strong export demand and a lower "good to excellent" crop rating compared with the same time last year.

Wheat, corn and soybeans
Source: Saxo Bank

Ahead of last month's price-bearish report, hedge funds had only just begun reducing a long position accumulated in response to challenging crop conditions back in early July. Since last month's release, funds have net-sold almost 350,000 lots in response to the price weakness which primarily has been visible in corn and wheat. 

Grains and fund position

Following some poor weather earlier in the season, surveys compiled by Bloomberg and Reuters both point to downward revisions in yield and production on soybeans and corn. 

Ending stocks, also called carryouts, is the amount of stock left over at the end of the 2017-18 season. Given the expected downgrade to production and yield surveys, also look for lower ending stocks. 

WASDE survey

Ole Hansen is head of commodity strategy at Saxo Bank
Ole Hansen Ole Hansen
The WASDE report helped send corn, soybean and cotton lower as yield and production increased by more than expected. Wheat held steady supporting a move higher in the Wheat-corn spread


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