Technically Speaking

Prior to the surprisingly large China purchases of soft red winter wheat, managed money funds felt comfortable holding the largest net short position of 124,000 contracts since May 30, 2023. The new China sales encouraged fund managers to reel in some of those shorts. Friday's Commitment of Traders report showed in the last two weeks funds bought in 53,000 contracts, leaving them still short 71,000 contracts as of Dec. 12.

It is interesting to note that on May 31, Chicago March wheat, with funds short a like amount, embarked on a rally from $6.23 to nearly $7.95. That was a rally of $1.72 per bushel in less than 30 days. It is also interesting to note that the shorter-term 20-day moving average is starting to cross over to the upside of the 50-day moving average, sometimes typical in a trend change. While much of the May-June rally may have been attributed to Ukraine-Russia, the soft red balance sheet has tightened considerably and there is always the chance China could return for more. Note: Early Monday, Chicago March wheat is down over 7 cents, but keep an eye on that market for a possible move back higher.

For several weeks, corn futures have been trading in a small and sideways range. March corn seems to be bound by $4.90 on the upside and $4.70 on the downside. A break and close above or below either of those parameters could set the stage for the next trending move in corn.

The market is fairly neutral at the moment with sideways momentum indicators. On the one hand, the U.S., with ending stocks above 2.1 billion bushels (bb) and comfortable, is bearish. But the fate of the market likely depends on Brazil's yet to be planted second (safrinha) crop, where crop scouts and government agencies have a wide range of predictions. Right now, the range of Brazil estimates is from 118 million metric tons (mmt) to 129 mmt. On a bearish note, Argentine corn production is on pace to be significantly larger than last year's drought-impacted crop. That, along with the upper end of the Brazil corn estimates, would be a bearish weight on the market. For now, corn remains sideways, but watch for a breakout to signal the next trend.

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The comments above are for educational purposes only and are not meant as specific trade recommendations. The buying and selling of commodities, futures or options involve substantial risk and are not suitable for everyone.

Dana Mantini can be reached at Dana.Mantini@DTN.com

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