Supply Versus Demand Standoff Continues

Author: Doug Christie

Fundamental

In the week following the printing of new supply-demand estimates, soy has been the only market to show much movement. The November contract is down 30 cents on the week and off 52 cents from pre-report levels. Corn is exactly unchanged this week, with wheat and cotton both down slightly.

With northern hemisphere crops nearing harvest, the latest USDA report has solidified supply expectations. Demand remains another story and the market has yet to get excited about that side of the equation. Until/unless there is evidence of increased demand in the market, the would-be bulls are likely to stay on the sidelines.

Technical

Technical indicators are unremarkable this week. As with fundamentals, beans are the most noteworthy, with the November contract posting a moving-average cross to the sell side. Managed Money increased their corn and wheat net short and decreased the net soy and cotton longs. The latest COT reflects positions as of September 12, which coincides with the WASDE release.

Macro

While outside sentiment is not driving the markets at this point, there continue to be signs that may eventually help support the ag markets. Petroleum continues to trend higher. Most of this is attributed to OPEC-led production cuts, but in petroleum at least the market seems more optimistic on forward demand. The USD has been mixed – retreating slightly from a spike last Thursday and nominally stronger week on week.

China showed its first bit of positive economic news: figures released for August showed growth in retail sales and a small reduction in unemployment rates. One month doesn’t tell the whole story, but stabilization there would help to bring confidence to the global outlook for agricommodities.

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.