This Week in Ag (July 19)

A strong week post-WASDE.

Fundamental

Grain markets retreated in the wake of the USDA WASDE report, but corn, soy and wheat have all bounced nicely in the last five trading days.

The report itself was largely as expected, with the main features being the incorporation of updated acreage figures along with a slight yield reduction for corn. The market reacted in classic “sell the fact” fashion on report day. Since then, all three markets have posted gains to post new highs for the month.

Crop-condition scores for the week showed modest increases for corn and beans, but concerns about the hot and dry weather pattern have been mounting, especially for corn. The Winter wheat harvest is halfway through and Spring wheat conditions have held steady.

Cotton activity for the week has been mixed, trading in a narrow range on both sides of pre-WASDE prices.

Technical

Healthy tech activity was shown in the major grain markets.

Soybeans remain in a healthy upward trend pattern while corn seems to be closing in on a bullish moving-average cross. Wheat can do the same with a healthy close today. Cotton continues its range-bound activity with near-term resistance at 8300 still unbreached.

The COT report reflects positions as of July 11 (pre-WASDE), so those figures should be tempered, given the recent price action. As an example, corn showed a good-sized increase in managed money short for the week going into the report – likely one reason for the strength of the post-report rally.

Macro

The Black Sea grain transit agreement officially expired this week. While long expected, the official expiration is likely pushing up corn and wheat prices.

Chinese economic news continues to disappoint as the country reported a 12% drop in exports year-over year for the month of June. This statistic supports the view of lowered manufacturing activity and a corresponding reduction in overall commodity import demand. While cotton is the only agricultural commodity which relies on export-oriented demand in China, the negative tone clearly weighs on demand sentiment.

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.