Well, it’s Valentine’s Day week and there is no love in the air for the grain markets. You have to look back to 2020 to find a mid-February that Cupid found himself showing up with such low prices in corn, soybeans and wheat.

These grain markets are best described over the last several weeks as a slow-consolidating bear market. Most of the analysis has drifted away from the weather talk in South America as the weather has turned more favorable for Brazil and Argentina production. (Therefore, a better likelihood of ample production to be the world’s leading exporter of soybeans, soybean meal and – more than likely – corn).

Anticipate a short covering rally?

No news is probably bad news in this case, but the market needs something to help stop the downward trajectory. There are a couple of items to be watching for that can lead to a change of direction among the grains.

As of last Friday, the Commodity Futures Trading Commission Commitment of Traders report showed the managed money traders holding a net short position of 297,744 contracts, that is only 24,271 contracts from a record short position from 2019. The managed money traders have remained relatively consistent in the wheat market holding net short positions around the 60,000 mark since mid-December.

Their involvement in soybeans has been the recent surprise. Since weather models began adding moisture to South Brazilian dry regions at the turn of the calendar, the funds have sold off over 134,000 contracts to bring their net position only 38,535 from the record net short position. A quick look back shows the funds have not been this short in corn, soybeans and wheat in the last five years during Valentine’s week. This shows the sentiment of the speculative traders in the market.

The market chatter is anticipating a reason for managed money to begin a short covering rally. What will spark an abandonment of their heavy short position in all three commodities?

Watch the 10-year baseline projection

For the 100^th time, the USDA Agriculture Outlook Forum will convene this week to give us their 10-year baseline projections for agriculture commodities. We must remember that these are the views of the World Agricultural Outlook Board and not the information gathered by the surveys performed by NASS. The information can and will vary from what we see at the end of March when the prospective plantings will be released.

However, this is information that the trade is starving for, something that can spark the liquidation process. In a Bloomberg survey, analysts projected the following average estimates for what the WAOB will publish on Thursday:

Prepare for big moves to come

Not a lot of detailed market analysis is focused on this week over the years (and probably for good cause). Yet, look at 2022 and 2023 for this week. It shows the market had significant market movements after “love week.”

There’s no real correlation with this week and consistent movement or trends in the market but these latest results remind us that big moves can happen when least expected. Stay flexible in your marketing plan and have orders working where you can take advantage of sudden market movements.

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