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Mixed Patterns Post-WASDE, Perhaps the Holidays Are Starting Early

Author: Doug Christie

Fundamental: Markets failed to make any strong moves in the wake of last Friday’s WASDE reports, which fell at the midpoint of the five-day reference period.  

Corn rallied going into the report but has now retraced, closing down 10 cents on the week on Tuesday. Soy fared somewhat better, posting an 18-cent gain for the reference period.

Wheat had been trending up going into the reports, but stumbled coming out, closing down 6 cents for the period. Cotton strengthened nicely going into the report and crossed the 83-cent threshold in the minutes after the WASDE release but has since retreated, closing at 81.05 on Tuesday.  

As for the report itself, the grain data was mostly uninspiring. A modest increase in US corn and wheat export projections, no changes in US soy figures, and a 2 million ton reduction to Brazil production estimates.  

In cotton, the USDA lowered US production estimates by 300,000 bales but also lowered estimates for US and global consumption, resulting in a modest increase to projected world ending stocks. 

Technical: In a similar fashion, tech signals have been muted in recent trading days. Moving-average indicators for corn and soy are narrowing, and relative strength levels are flat. Wheat has been able to hold a moving-average bullish signal. Cotton posted a bullish 10/25-day moving-average cross to start this calendar week, but that development is overshadowed by the 50/200 day moving-average bearish cross.  

Commitment of Traders reports reflect pre-WASDE positions and showed managed money reducing net directional exposure in all three grains and maintaining a flat position in cotton.

Taken collectively, the tech picture is uncompelling. 

Macro: The story here is the continued weakness in crude petroleum with prices posting a second week of 5% decline.  Oil is the leading component of most commodity fund indexes and often a bellwether for overall commodity sentiment. 

The USD index was marginally weaker across the 5-day reference period. For the general economy it seems a US ‘soft landing’ is in sight.  Ultimately that should be supportive of a risk-on mentality but to date it appears to be playing out in financial markets and not in the commodity space.  

There has been no post-WASDE jumpstart for markets, and with the lack of strong fundamental data and a modest technical outlook, these markets may be ho-humming their way into the December holidays.

Trading strategy is based on the author's views and analysis as of the date of first publication. From time to time the author's views may change due to new information or evolving market conditions. Any major updates to the author's views will be published separately in the author's weekly commentary or a new deep dive.

This content is for educational purposes only and is NOT financial advice. Before acting on any information you must consult with your financial advisor.