This Week in Ag (August 9)
Sideways price action as market looks to WASDE report on Friday.
Fundamental
A similar theme this week. The generally hot weather pattern continues but with enough scattered moisture to keep bulls defensive.
Condition scores for corn and beans reflected that, with a slight uptick in Good-Excellent ratings this week and a 2% reduction in the area reported as under drought. In cotton, the Texas situation remains a concern, with 55% of the crop there categorized as Poor/Very Poor. The winter wheat harvest is winding down, with only 13% of the crop yet to come in.
The 6-10 day outlook calls for normal/near normal conditions for both temperature and moisture in the grain belt. Heat remains in the South but with slightly better precipitation prospects over the forecast period.
On the demand side, new export sales for the week, year-to-date sales and total open commitments were behind last year’s pace for corn, beans, wheat and cotton.
Looking ahead to WASDE, it seems likely that upcoming production forecasts will reflect some of the stress seen on the crop since the July report. But whether any revision is enough to cause a reevaluation of prices remains to be seen.
Technical
Technical indicators are not doing anything to counteract the ho-hum fundamentals.
Corn, soy and wheat are all operating under a negative moving-average signal. Cotton tech action has been stable, but the bearish influence of last week’s major reversal is still weighing on the market.
As expected, COT reports showed a reduction in managed money net long positions coinciding with the downward price moves of last week, adding to the softer tone.
Macro
As above, there is nothing overly compelling in the macro picture.
Positive views on the US economy seem to be solidifying, but Tyson Foods' announcement that it plans to close four more chicken-processing plants is not supportive for corn and soy demand.
Concerns about the economic health of prominent export buyers appear well founded, with China, South Korea and Vietnam all showing manufacturing contractions for the month of July, as measured by purchasing-manager reports.
The Black Sea grain shipment issues remain unresolved, but seasonally it is not yet a critical time for those trade flows, so specific market impact is limited.
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