Quarterly Outlook
Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges
Althea Spinozzi
Head of Fixed Income Strategy
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Grain market looks to WASDE for direction
Ole Hansen
Head of Commodity Strategy
Summary: Grain and soybeans traders await the release of the monthly supply and demand report from the US government at 1600 GMT. Last months report wrong footed the market and helped send corn down by more than 10% and wheat by 5%.
Grain and soybeans traders have spent the past week scaling back short positions ahead of today’s 1600 GMT release of the monthly supply and demand report from the US Department of Agriculture.
Last month’s surprisingly upbeat report helped send corn down by more than 10% after the government report penciled ending stocks close to 40% higher than trade estimates. Wheat dropped by 5% while soybeans was down by a mere 1.5%.
With the US harvest about to get under way this will be the final report purely based on estimates instead of hard data. From September 16 the USDA will release a weekly harvest progress report for wheat while corn and soybeans will join the following week.
From July up until September 3 hedge funds had according to the weekly Commitments of Traders report reversed a 200k lots long position to a 119k lots short. The net position in wheat meanwhile has stayed close to neutral while speculators amid lack of Chinese buying have held a net-short in soybeans since February.
Corn for December delivery reached life-of-contract low last week at $3.52/bu before the mentioned short-covering helped lift the price to the current $3.61/bu. At this stage it will take a break initially above $3.64/bu but more importantly $3.80/bu before talks of a meaningful recovery can begin. A late-summer heatwave has raised hopes that late-planted US crops could accelerate towards maturity thereby reducing the risk of a late harvest causing frost damage.
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