A Grain Market Rollercoaster
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April Crude Oil in store for a breakout to the upside? March soybeans clinging to critical support.
Matthew Bresnahan, Market Strategist
Weekly Grain Market Recap:
It’s been a slog in the grain markets in the wake of last Friday’s bearish USDA report. Selling pressure has dominated the complex each day of this week seemingly as soon as the 8:30 opening bell rings. But it’s not all bad – exports were mostly in line with expectations, but improved from last week, and Friday saw a flash sale of 297,000 MT of soybeans to China. March soybeans are defending critical support, and continued defense of 1200 next week could instigate a short-covering rally at least in the short term.
Corn:
It may not feel like it, but March corn prices have held up fairly well considering the USDA’s surprise increase in ‘23 yield estimates to record highs at 177.4 BPA. The contract made new lows just after Thursday’s open, trading down to 438 but was able to put up a nice fight for the remainder of the week. Despite Thursday’s early trade, the contract managed to close in positive territory both Thursday and Friday. For the week, the contract settled just 1 ½ cents lower to settle at 445 ½. The ability to defend 2-star support between 440 and 441 both Thursday and Friday is important. If Bulls can hold their ground into next week, another defense of the support pocket there could spark a short covering rally, pushing price back to our 450 – 452 pivot pocket. Managed money funds have amassed their largest bearish bet since June 2020 by holding a net-short position of 260,542 contracts (155,283 long vs 415,825 short). Thus, the propensity for a significant short-covering rally is certainly in play – remember – every bull market starts with a short-covering rally.
Soybeans:
The story in soybeans for the week was the inability to sustain overnight strength. The best example of this came on Friday morning, with the contract reaching its high for the day just seconds after the opening bell rang. Selling pressure following the open has plagued all of the grain markets – not just soybeans – but soybeans bore the brunt of it. Friday morning, we managed to trade all the way up to 1227 before ultimately settling ¼ cent lower at 1213 ¼. For the week, beans settled 11 cents lower. But, it’s important to note that we’ve staged 3 separate defenses at the 78.6% retracement of the June lows and July highs. If we’re going to get a recovery rally, it is imperative that Bulls defend the 1200 handle. Another defense of 1200 early next week could lead to a short covering rally back to 1250. Managed money funds have gradually built their bearish bet in soybeans, holding a net short of 76,797 contracts. Broken down, that is 53,776 long positions compared to 130,573 short positions.
Wheat:
It’s been a while since the wheat complex was the most bullish component of the grain complex, but that’s where we’re at. This week’s extreme temps bear the potential to show winterkill damage to winter wheat growing in the western Corn Belt, and we’ll likely see the ramifications of the arctic blast over the course of the next couple of weeks. Wheat managed to settle higher in 3 of the 4 trading days this week, but it still settled the week 2 ¾ cents lower after Tuesday’s sharp losses to settle at 593 ¼. Unlike the other grain contracts, wheat has been able to defend its contract lows all through December and January thus far. It will be important for bulls to manage a close above the 600 handle if we’re going to test 3-star resistance between 608 ½ and 611. Managed funds have gradually curtailed their bearish stance, which now totals 68,575 contracts (73,485 longs vs 142,060 shorts). As such, a rally in wheat futures will likely be the result of underlying market fundamentals as opposed to money flow (short covering).
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