Early Market Talk August 26, 2020

Emtwebsite

Short covering in corn continues with open interest off a huge 42K contracts yesterday on volume of 571K. Funds covered a guesstimated 30K contracts on the day and now short 80K. Soybean OI up a timid 1.5K contracts on anemic 222K contracts of volume.

At 0630 CZ20 trading off 1 ¼¢ at $3.53 ¼ on volume of 28K contracts. SX20 up 2¢ at $9.22 on vol of 15K. KC wheat giving up 3¢ this morning.

Dow futures off 40 points at 28,152. Crude off 13¢ at $43.21. US $ Index lower.

As previously noted, Funds have been holding a net corn short since mid-August of a year ago and every day that goes by adds to that record. Another observation that may be tested is that after a big short started to be covered once they got to even, they almost always would get long at least 100K contracts.

Time of year makes me think trade is overdoing amount of corn crop loss occurring because of dryness. Crop ratings typically decline late August. Most certainly that crop is smaller than a month ago but I’m not in the disaster camp. Might be hard to continue a rally with cooler tempos and some rain next week. Funds no longer short takes away some power as well.

Soybeans have some tough technical resistance overhead with a Fibonacci 62% retracement level near the $9.25 level.

Corn spreads tighter on order flow. Suspect we may be setting the stage for the best carry to be shown on or slightly before first notice day. Suggest we stay patient of CZ20 forward corn spreads.

Funds short 80K corn and long 111K soybeans.

Weekly ethanol production / demand and stocks data.

Normally consider that markets do more than you think. Both up and down. Given the date however, this week maybe it for the corn market.

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