This Week in Ag (September 6)

Cotton up, soy down, grains unchanged across Labor Day period and one week out from WASDE.

Fundamental

Cotton moved up sharply going into the long weekend but was unable to sustain those gains coming out of the holiday. In what has been a hot and dry summer across the US, no region has had it worse than Texas and that seems to be reflected in cotton markets. Supply will undoubtedly be negatively impacted, but the market has only reluctantly priced that in as demand concerns linger.

Soy markets moved lower over the past four trading days, with November beans closing at $13.65 on Tuesday. Corn and wheat prices drift sideways; prices for both are unchanged compared to one week ago.

While forecasts turned hotter and dryer for the first half of September, that has not been supportive for prices. Crop scores released yesterday moved slightly lower for both corn and beans, but as we approach harvest the link between condition scores and actual yield weakens so market reaction should be limited. More attention will be given to reading of the upcoming September 12 WASDE and the publication of new supply-demand tables.

Technical

The soy market has been unable to sustain upward momentum after piercing $14.00, and that has softened the technical picture. The relative strength indicator in soy now shows a balanced market while the 10 and 25-day moving averages are approaching a bearish cross. Open interest and managed money long positions were both climbing through August 29 but have likely retreated some since then.

Corn appears to be consolidating, with a notable reduction in the managed money net short position and a reduction in open interest.

Wheat remains in a strong downtrend but flashing an oversold momentum indicator.

The cotton chart is throwing off mixed signals. The market moved strongly through 88 cents and quickly touched 90, before falling off on Tuesday to close at 88.76. Continued weak action in the next few days could paint this as a triple top, setting the stage for a stronger downside move.

Macro

It was a quiet week for macro factors, with the Labor Day holiday shortening two trading weeks. The USD index rallied, adding a bit to the existing concerns on overseas demand. Russia has indicated it will not support the Black Sea transit pact, but most seem to read this as a negotiating position prior to those harvests and not a definitive answer.

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.