Grains Up But Cotton Down Following October WASDE Report

Author: Doug Christie

Fundamental

The October WASDE figures gave a jump start to grain markets, with lower production estimates posted for US corn and soy.

The USDA lowered yields for both crops and that was enough to get a bit of upward momentum. Soy has been able to sustain that, finishing at $12.96, up 20 cents over the past five sessions. Corn has retreated since the report-driven rally and now sits only one cent above its pre-WASDE levels.

Wheat is up marginally after a WASDE report that raised stocks in the US while reducing global figures.  Cotton has been soft, with another 200-point decline over the past five sessions. 

For cotton, the WASDE release went largely as expected, with a reduction in US production and ending stocks. The global balance sheet gave off mixed signals, with a reduction in stocks due to backward revisions in accounting for previous years‘ Brazilian production. The market has continued to work lower following the report due to concerns on demand overall and US export demand in particular. 

Technical

No compelling developments in grain charts in the past five days.

The soy rally has brought that market within striking distance of the 200-day moving average, so we may see a test of that in the coming days. Cotton has held a negative tone since breaking below the 50-day moving average and is now testing the 200-day moving average on the downside.

Momentum indicators are flat in all markets. COT reports as of October 10 showed managed money trimming their corn short by 46,000 contracts, with modest changes reflected in spec positions in soy, wheat and cotton. 

Macro

Despite a tumultuous week for the Mideast and continued dysfunction in the US House of Representatives, those events have not seemed to be major drivers over the last five sessions. Dollar strength moderated while petroleum rallied and both were nominally supportive to grain 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.