Markets Consolidate as US Harvest Approaches

Author: Doug Christie

Fundamental

Futures prices have remained in a narrow range over the past five trading days, with corn finishing up 3 cents, soy down 12 cents, wheat up 5 cents and cotton up 56 points.

The decline in beans has slowed while corn and wheat both managed to stabilize and post small gains. Cotton showed a modest recovery after a dip below 86 cents.

Reports as of September 25 show harvest activity beginning, with corn 15% harvested, soy 12%, and cotton 13% complete. All these figures are in line with five-year averages and reflect activity in traditional ‘early’ states. Demand concerns remain as US export sales have yet to show significant activity that would typically be expected with US new crop ready to be marketed.

Technical

The tech picture is also a continuation pattern. No change in the moving average sell indicators for corn, beans and wheat, with all three showing a narrowing gap between the 10- and 25-day signals. Cotton is verging on a bearish cross.

COT reports for September 19 were unremarkable and also skew slightly bearish, with managed money increases in corn and wheat shorts and a decrease in soy managed money longs. Cotton positions were unchanged. As with fundamentals, the market isn’t giving any strong signals for a breakout move in either direction.

Macro

Fundamentals remain a headwind to ag commodities. Expectations for another rise in interest rates this calendar year have pounded stock markets and added further strength to the USD, raising short-term concerns for US export competitiveness. The macro news was enough to cap the rally in crude oil which to this point had been a source of sentimental support for ags.

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.