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 / 13 September 2016 at 13:11 GMT

US bumper crop keeps growing, soybeans sell off: WASDE

Head of Commodity Strategy / Saxo Bank
  • WASDE report raises expectations for soybean harvest
  • Wheat receives initial boost from world stocks downgrade
  • Soybean selloff continues as funds unwind record net-long

Soybean prices are on the wane as hedge funds retreat from the record 
net-long position established four months ago. Photo: iStock

By Ole Hansen

Following the very upbeat August estimates for the upcoming US harvest in the US, which helped send the price of corn and wheat down to a multi-year low, traders were looking for the September report to provide an update and to see if these expectations could be maintained.

In the end, the market once again came under renewed selling pressure after US officials in their World Agriculture Supply and Demand report raised expectations of the domestic harvest of soybeans and subsequent ending stocks by more than was expected. 

The near-record corn yield projected last month was lowered less than forecasters maintained, and this also added some pressure to corn futures.

Wheat received an initial boost from the near-four million tonne downgrade to world stocks (to 249m tonnes). Despite being lowered, this would still leave the world with a record supply of wheat at the end of the 2016-17 season. 

December CBOT wheat hit a key level at $4.11/bushel from where it has subsequently retraced. 

WASDE result

Soybeans were the biggest loser with the November futures contract initially falling by 3%. Not only was the yield per acre raised to a new record of 50.6 bushels/acre, but at the same time the USDA lowered its forecast for soybean imports from China in 2016-17 by 1m tonnes to 86m tonnes. This helped trigger a 10.5% rise in soybean stocks at the end of the 2016-17 season. 

Corn also came under pressure as the yield/acre was only reduced by 0.6 bushels/acre against market expectations of a 2.5 bushel/acre reduction. Despite the downgrades, yield and production remained in record territory and are likely to keep the upside limited while we await the next update.

In the week ending September 6, hedge funds were holding an elevated short position in corn and a record short position in wheat. These developments have helped cushion both crops so far this month despite the continued headwind from a large crop. 

A net-long position has been maintained in soybeans since March but after hitting a record net-long three months ago, funds have been selling the bean on a near-continuous basis since. 

Speculative positioning in CBOT grains

— Edited by Michael McKenna

Ole Hansen is head of commodity strategy at Saxo Bank


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