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Markets Have a Defensive Tone

Author: Doug Christie


The release of the October WASDE report on Thursday will be the primary fundamental focus for markets.

Coming into the report, the major US crops have had a defensive tone. Corn and soy are basically unchanged in price over the past five trading sessions, while wheat and cotton have both moved sharply lower with wheat trading down 28 cents and cotton moving 200 points to the downside.

Harvest has progressed well in soybeans, now running ahead of five-year averages at 43% complete. Corn and cotton harvests have moved forward in line with five-year averages at 34% and 25% complete.

With harvest moving along and the USDA set to gauge US crop production numbers, the supply focus will shift towards South American weather and prospects. On the demand front, the market continues to be guarded about the potential for US exports, raising the importance of week-by-week export sales and shipments reports.  

In some instances, the simple fact of getting a WASDE report in the rearview mirror can free the market up for a new move. In the current environment, it might take an outlier figure to get markets moving.  


Tech developments over the last five sessions include a big decrease in soy managed money long to the point that the net fund position was nearly even as of October 3.  

Managed money trimmed their short in corn and increased the short in wheat, with the latter now showing a sizable position while cotton managed money remains a modest long.

Moving average signals are flat in corn and cotton and remain on the sell side in beans and wheat. Market momentum indicators are mild, with soy and wheat trending toward oversold with other markets in balance. 


World events were significant in ag markets, with cotton and wheat both moving lower as crude oil prices plunged late last week. Surprisingly, corn and soy seemed less sympathetic, despite the fact those commodities have a more direct intersection with energy markets via ethanol and biodiesel production.  

The response to the violence in the Middle East has thus far been muted. Wheat trade flows would seem to be the most relevant, with the region being a significant destination market.  The downward correction in the dollar has yet to lend much support. The same can be said for a generally more positive tone in financial markets.  

The risk-off mentality seems to have slackened, but not to the point of invigorating agricultural commodity markets. 

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.