Limited Price Movement as US Harvest Progresses

Author: Doug Christie

Fundamental

Price action was narrowly confined over the past five trading sessions. Corn moved down five cents, with all of that move coming in Tuesday's session. Soy rallied for a few days before correcting to close down 1 cent across the five-day period. Cotton slowed its decline from previous weeks but still finished off 30 points. Wheat was the biggest mover, posting a 10-cent decline.

Crop progress reports showed continued harvest activity, with corn reported at 59% done, soy at 76% and cotton at 41%. With US harvest activity entering its later stages, supply-side analysis will continue to shift toward South American planting and weather developments. In that regard, things seem to be on track for timely planting and periodic moisture for the time being. 

Demand concerns remain a feature in most markets, particularly cotton where year-to-date US export sales remain well below trend. 

Technical

While price action has been quiet, we are approaching some potential tech inflection points in grain markets. Corn is approaching a 10/25-day moving average bearish cross, while soy and wheat approach a 10/25-day moving average bull cross. 

To some extent, the narrowing averages reflect a period of recent calm, but a breakout could add some fuel to any potential next move. Soy again pushed up against the 200-day average but failed to breach it before retreating. Momentum indicators are in balance across all three grain markets. 

Cotton remains under the bearish influence of breaking below the 200-day moving average. The pace of decline has slowed, and momentum indicators are tilting toward being oversold, but the weight of the 200-day barrier should keep markets on the defensive for the near term. 

COT reports for grains showed limited movement in managed money positions or total open interest. Cotton COT showed a 14,000-contract reduction in net managed money longs as of October 17.

Macro

External markets continued to give muted signals for ag trade. Petroleum rose above $88 before retreating below $83 while USD strength moderated. Global equity markets remain volatile and while not necessarily flashing “risk-off’,  they certainly haven’t done enough to dispel concerns about medium-term growth prospects.

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.