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Frost on the pumpkin

agweb.com, 06.10.20


I do not know about where you live, but here in Northern Illinois, we had a bit of frost on the pumpkin this morning.

This is actually a few days early for our average frost date, but outside of a few late garden tomatoes and exposed flower pedals, I do not suspect there was too much crop damage. Looking at the early action in the wheat trade this morning, one might imagine that a few traders were alarmed that there may have been damage in early planted winter wheat, but I suspect there are also some supply concerns from around the globe. While not a surprise, the U.K. confirmed a 38% reduction in wheat output this year, but conditions have not been exactly ideal in Ukraine nor Argentina. Russia continues to tout a solid wheat crop as IKAR has now boosted production estimates to 83 MMT this year, but the prices there and in Ukraine continue to escalate on solid demand and tight producer holding. While no details have emerged just yet, it has been reported that Russia will again enact an export quota system this year. While not one of these factors would appear to be enough to lift wheat prices, but combined, along with a lower dollar, have been enough to carry future back to within striking distance of the 6.00 mark, which we have not violated in spot futures since 2015. While I suspect it will be challenging to push through this level, as I have noted in past commentary, wheat appears to have been carving out a saucer type bottom over the past five years or so in defiance of the known fundamental picture. While certainly, not everyone subscribes to this theory, but chartists believe that significant changes will reveal themselves in chart patterns before the fundamental justification becomes completely known.

While China appears to be pre-occupied with their Mid-Autumn Festival (October 1st to 8th), we do at least have other export interest. This morning the USDA announced a sale of 160,200 MT of corn to Mexico.

Speculative funds have continued with their buying ways but at a significantly reduced pace last week. Money managers added another 17,900 contracts to the long side of their bean position, which now stands at just over 229,000. Not a record just yet, but we appear to be closing in on one. In corn, they added nearly 11,000 contracts and now sit with a long position of nearly 107,000 contracts. Interestingly enough, they reduced their net long position in wheat by around 2,000 contracts.

Looking at the macros as we begin the week, we find energies and metals both quite strong, financial instruments under heavy pressure, equity markets higher, and the dollar under pressure.

https://agweb.com/blog/frost-pumpkin



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