Afternoon Corn and Wheat: Positive Friday and weekly closes for both markets

Afternoon Corn and Wheat:  Positive Friday and weekly closes for both markets

For once, "Big Friday" finally treated the grain markets relatively well, though the Goldman Roll did make its presence felt in the Sept contract. Corn finished the day 3-4 cents higher Dec-July, within a 12 cent intraday range (the lows were made in the dead of night). Wheat was the more confident of the two, as has been the case recently. Chicago gained 6-10 cents, Kansas City 14 cents, and MPLS 11-12 cents. Cash was relatively steady/quiet to conclude the week, though CIF Corn did manage to gain a penny.

CFTC Commitment of Traders data after the close found fund buying in both corn and wheat. For the week ended 8/3, large non-commercial traders (aka "Large Spec" or "fund") were net buyers of 12,337 corn, which comprised 8,558 new longs and 3,779 covered shorts. The buying in wheat (+14k in Chicago, +6k in KC) was almost all new length. Commercials were sellers in both, and small non-reportable traders (farmers?) were also notable net sellers of corn. When including recent activity, we believe funds are heading into the weekend net long over 170,000 corn, short just over 10,000 Chicago Wheat, and long just over 20,000 KC Wheat.

The wheat market continues to enjoy a lively world trade, which is supporting price in exporting countries. European milling wheat futures rallied smartly today, perhaps with an eye toward French harvest delays. The crop is reportedly two-thirds harvested but is running roughly eleven days behind average on 'too much rain'. There is also some discussion of potential damage done to Argy's wheat crop, though not enough so far for anyone to offer a meaningful downgrade to official production estimates? So far, all of this has yet to translate into a major upswing in U.S. export business, underscored by yesterday's disappointing weekly sales report.

Corn remains solidly in the throes of weather markets, and there continues to be a little something for everyone. Forecasts still suggest some very good rain coverage for the central Midwest this weekend and into early next week. The epi-center will be Wisconsin, SE MN, Eastern Iowa, N IL, N IN, and SW MI. The second week of the forecast is expected to trend drier, which will raise some concern for crops that miss out, particularly in the Western Belt. Yield number-crunching is also running hot and heavy, particularly in front of Thursday's crop report. The results thus far have been rather uniform; a Bloomberg survey of 27 analysts found a corn yield range of roughly 175-180 bpa for a crop of 14.7-15.2 billion bushels.

Elsewhere, corn end-user markets had a mixed week - dairy and ethanol lower, while cattle and hogs posted small gains. Spot ethanol margins have drifted back to very small profits, while many dairymen are likely struggling to hit breakeven. Rumors persist of new crop corn business being done, but as of yet, there has been no official confirmation (aside from a decent weekly sales report yesterday). No new damage to wheat around the world occurred this week, but losses this year in Canada, the northern U.S. Plains, Kazakhstan and a few neighboring areas of Russia has been notable. Australia's small grain crop is poised to reach spring in very good condition. Wheat harvesting in the U.S. Midwest and SE Canada is progressing around periodic rain. Tunisia was said to have bought 75,000 metric tons of soft wheat from $313-318/mt C&F. Bangladesh was in for a cargo of wheat overnight, and Taiwan purchased 48,000 metric tons of U.S. wheat.

In the options, the trade of the day was in the corn, where a player bought 10,000 Dec $6 Calls and sold 20,000 Dec $7 Calls, paying 10 ½ to 12 cents. Another house bought 1,000 Oct $6.50 Calls, paying 3 cents. Wheat and bean options, by contrast, were much less lively today. Day 1 of Goldman made its presence felt; U/Z corn lost 4 cents today and U/Z wheat lost almost 2 cents. Big day for "red" Dec 2022 corn, which traded to a two month high today. Corn lost to the wheat but was relatively steady versus the beans. On the charts, corn features a narrowing short-term range, with support at $5.40 CZ and resistance around $5.70. Coiling? Indicators lean positive? Wheat held initial support yesterday and is taking aim at the May highs. We would expect significant resistance up there, particularly with U.S. wheat struggling to trade into export channels. KC Dec Wheat features initial support at $7, ditto Dec Chi at $7.20.