October 18, 2023
Money-managed net funds were significantly affected by the latest WASDE report release and speculators placed their bets according to WASDE’s estimates for wheat, corn and soybeans.
Wheat
Speculators Bet on Bearish Scenario for US Wheat
- Speculators expanded their net short positions for the 5th straight week (as of Oct 10, 2023, CFTC data). Current money managed net funds for CBOT wheat, both for HRW and SRW, are 111,536 contracts short.
- This is the lowest seasonal level since 2016. It’s likely that this represents a signal that speculators expect wheat futures to face an upcoming drop.
- The USDA’s latest monthly WASDE report was constructive for wheat as adverse weather in Australia, Canada and the EU is expected to tighten global supply.
- The global wheat balance continues to tighten, with 2023/24 ending stocks lowered by 7mt to 258.6mt, which is far below the 264mt expected by the market.
- This tightening was driven by revisions lowering supply with 2023/24 global output cut by 6mt. The reduction in supply was offset partially by expectations for higher Ukrainian output.
- The main concern for Ukrainian supply is whether it will all be able to make it onto global markets.
- No changes were made for the US wheat markets, as this year’s output is expected to be higher than last year’s
Corn
Corn on the Rise but Demand From China Has Plummeted
- Corn futures edged up toward $5 per bushel after the USDA lowered its corn harvest estimate due to hot and dry weather. Speculators decreased their net short position by 45,024 contracts long, the biggest positive change since July 25th .
- The revised estimate for the US corn harvest is 15.064 billion bushels with an average yield of 173.0 bushels per acre, down from the previous estimate of 15.134 billion bushels and 173.8 bushels per acre.
- Still, the US corn market is facing pressure due to an uncertain global outlook and reduced shipments to China. China has decided to source more of its soybeans from Brazil, leading to a decline in demand for US corn.
- Specifically, China has secured about 780,000 tons of US corn for the 2023-24 period, significantly lower than the 3.4 million tons from the previous year and nearly 12 million tons from two years ago.
Soybeans
Soybeans on the Way to $13 Benchmark, Brazil’s Crop is a Counterweight
- Money managed net funds for CBOT soybeans futures remained unchanged during last week after a steak of five consecutive weeks where the short contracts outnumbered the long ones.
- Soybeans closed higher for the week breaking a streak of several lower weekly closes. Soybean futures rebounded to trade above $12.9 per bushel after the USDA lowered its soybean harvest estimate due to unfavorable weather conditions.
- The revised estimate for the US soybean harvest is 4.104 billion bushels with an average yield of 49.6 bushels per acre, down from the previous estimate of 4.146 billion bushels and 50.1 bushels per acre.
- Earlier, soybean prices hit a 4-month low of $12.5 as the U.S. soybean harvest progressed, adding to already ample supplies from Brazil.
- Brazil is experiencing its biggest soybean crop ever, and the government expects even more soybeans in the 2023/24 season, with a 4.8% year-on-year increase, reaching 162 million metric tons.