August 29, 2023
Net non-commercial positions could prove to be a useful indicator for main agriculture futures in the long term.
Speculator funds decrease after YTD high
- Net non-commercial positions fell for a 4th consecutive week per data reported on August 22nd. CFTC reported that net non-commercial positions expanded to -53,977 short, close to the mid-February level.
- Speculators expect the desire of Ukraine’s five neighbors to extend the EU ban on Ukrainian grain imports through the end of the year could come to fruition, potentially leading to lower demand for Ukrainian wheat. The ban imposed in May by the EU allowing Poland, Bulgaria, Hungary, Romania, and Slovakia to ban domestic sales of Ukrainian wheat, maize, rapeseed, and sunflower seeds is set to end on September 15th.
- The European Commission lowered its estimate for wheat output by 300k MT to 126.1 MT. Harvest pace has been delayed and quality concerns have been in the headlines due to consistent August rainfall, but the EC did not directly cite that as the reason for its production cut.
Net non-commercial positions moving close to YTD low
- Net non-commercial positions fell for the 4th consecutive week per August 22nd data. CFTC reported that net non-commercial positions expanded to -62,212 short.
- Corn futures slumped to $4.70 per bushel, revisiting the nearly four-year low experienced on August 15th. This decline was influenced by encouraging initial crop tour findings and an elevated rating for US corn.
- Conversely, scorching temperatures and inadequate rainfall in the US Midwest have offered some backing to the commodity. The US government’s forecast indicates that the dry conditions at the onset of the growing season will result in smaller harvests this autumn.
- Nonetheless, owing to substantial acreage and improved growing conditions during the critical developmental period of July, the corn crop is projected to be the second largest on record. In terms of soy and corn exports, the US is predicted to hold the second position behind Brazil for the current year.
Mixed signals from speculative traders on soybeans
- Net non-commercial funds for soybeans increased last week, after 3 consecutive weeks of decline, standing at 61,682 positions, close to the level in early May.
- Soybean futures extended gains to $13.8 per bushel, the highest in over two weeks, as dry weather in the US Midwest is causing worry about the well-being of soybean crops. The lack of sufficient moisture could potentially harm crop growth and yield.
- The USDA expects soybean production to be lower by 95m bushels due to lower yields. Soybean exports are anticipated to be lower compared to the same period the previous year, driven by lower supplies. Given unchanged feed concerns, the ending stocks are forecasted to reach 245m bushels, down 55m bushels from last month.