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 October 2017 at 11:38 GMT

Grains, cotton on hold ahead of WASDE — #SaxoStrats

Head of Commodity Strategy / Saxo Bank
  • Dec. wheat, corn futures close to contract lows
  • November soybean prices stable despite Brazil worries
  • Reuters survey points to upgrade in corn, soybean yields/production

The November soybeans contract is holding steady despite Brazilian weather concerns and new lows on December wheat and corn. Photo: Shutterstock

By Ole Hansen

December wheat and corn futures are both trading close to contract lows ahead of the US Department of Agriculture's monthly WASDE crop supply and demand report due at 1600 GMT.  The price of November soybeans, meanwhile, has held up in response to lingering worries that dry conditions in Brazil could delay sowings. 

While weekly crop conditions report for corn and soybeans have improved, some uncertainty still lingers given a recent weather-related slowdown in the harvest. In the weekly crop progress report from the USDA covering the week to October 6, the corn harvest was 22% complete compared with a five-year average of 37%; for soybeans the number was 36% compared with 44%. 

Grain charts

Hedge funds' positioning in the week to October 3 showed a net-short in wheat and corn and a net-long in soybeans. Positioning in all three crops, however, remained below the longer-term average given the abundance of supply. 

The corn net-short at 143,201 lots was 69% of the one-year peak while wheat's 56,475 net-short was only 35%. Funds held a small net-long in soybeans of 27,758 lots, some 16% of the one-year high. 

Speculative positioning in grains and beans

A survey carried out by Reuters points towards an upgrade to corn and soybean yields and production. Ending stocks or the carryout which is the amount of grain left over after all demand has been satisfied are expected to be lower for both soybeans and corn by the end of next August. 

Wheat stocks, meanwhile, are forecast to be raised. 


The report also contains updates on cotton production and stocks. This will be the first report estimating the damage to US crop from hurricanes Harvey and Irma. On that basis, both production and inventory levels are expected to be cut. 

Since the initial and wild fluctuations when the hurricanes hit, cotton has settled into a range with growers happy to sell at $0.7/lb while mills have been buyers towards $0.67/lb.


— Edited by Michael McKenna

Ole Hansen is head of commodity strategy at Saxo Bank

Pandorra Pandorra
Dear Mr Hansen, would you please share with us your thoughts on the latest WASDE report.
Appreciate your opinion on cocoa market also. Thank you for further comments.
Ole Hansen Ole Hansen
Highlights from Bloomberg:
Hurricane Irma hurt cotton yields in Georgia, the second-biggest cotton grower, more than Hurricane Harvey hurt yields in Texas, the biggest producer.
Soybean supplies are less than analysts forecast because the USDA changed its estimate for inventories coming into the current marketing year. Crop size and use estimates were left unchanged.
The USDA estimated that corn yield for this year's crop rose 1.9 bushels an acre from last month because of favorable harvest conditions.
The wheat glut continues, with raised estimates for crops in Russia, the European Union and India offsetting a lower forecast for Australia. Projected inventories for next year exceeded that of any analyst surveyed by Bloomberg.


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