Soy Up, Cotton Down Heading Into WASDE Report
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Author: Doug Christie
Fundamental: Soy and cotton were the most active markets over the past five sessions.
Beans posted a 61-cent gain on news of renewed US exports to China. After a signing-ceremony pledge to increase purchases of US farm goods, the market was further buoyed this week by reporting of actual sales of US-origin soy. The increase in activity is what the bean market needed to ease concerns on the demand front.
In cotton, harvest supplies continue to push the market lower, despite a reasonably strong weekly export sales report. Deliverable stocks of cotton continued to build and weakness in the nearby futures month has widened inter-month spreads.
Grain markets were less active, with corn trading down 10 cents while wheat rallied 14 cents.
Thursday’s WASDE reports will be interesting. Harvest progress has been consistent so there should be limited input to change US production forecasts, while potential does exist for more active demand-side updates, as well as modifications to foreign crop estimates.
Technical: Big price moves in soy and cotton are being reflected in tech indicators.
A bullish 10/25-day moving-average cross was seen in soy and prices have climbed above the 200-day moving average. Cotton has broken below summer lows and the bearish moving-average indicator remains in place.
The only tech counterweights observed in these two markets are momentum indicators, which are flashing strongly overbought in soy and oversold in cotton. COT reports as of October 31 are lagging behind the latest price moves, so no strong conclusions can be drawn there.
Macro: Crude declined sharply and the USD index was moderately weaker. It remains to be seen if recent strength in financial markets can become a general tailwind for ag commodities. For the moment, market-specific factors are more featured.
Soy and cotton are strongly trending markets right now and both are extending their moves leading into crop report day.
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.
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