Wheat, Corn and Soybeans Prices Come Off Lows After WASDE

Shorts Squeezed in Agricultural Commodities as Fundamentals Strengthen

• Agricultural commodities extend recent gains off multi-year lows.
• Friday’s March WASDE report trims bearish market bets.
• Wheat, corn and soybean markets in focus.

WASDE report may help agricultural commodities put in a bottom

It’s been a while since a WASDE (World Agricultural Supply and Demand Estimates) update in November, but agricultural markets have suffered some severe losses. Since then, grain markets have been smashed in 2024 due to increased supply over the past year, but signs that the bottom has been put in are flashing, and traders are taking notice.

Corn, wheat, and soybeans are all coming off multi-year low levels as the fundamental backdrop shifts from very bearish to just a little bearish. Will the shifting, albeit still bearish fundamentals, allow these agricultural commodities to put in more gains?

Wheat recovers off lows following WASDE

If you were trading wheat futures (/ZW) on Monday morning, you saw a market breaking into its lowest levels since August 2020, but prices started to rally into the afternoon, and wheat prices are up 1.81% on the week as of March 12, its best weekly performance on a percentage basis since December 2023.

Chicago SRW wheat futures and Kansas City futures, when combined, show the largest short position among speculators since mid-2019, according to the Commitments of Traders report (COT) from the Commodities Futures Trading Commission (CFTC).

The elevated short position leaves prices exposed to a potential short rally and highlights the fact that shorts may not have much more patience to stay in the trade.

Another development to consider is changes in the latest WASDE report from the United States Department of Agriculture (USDA). Global ending stocks were lowered by 0.6 million tons to 258.8 million tons, per the WASDE, which was released on Friday.

At the same time, global consumption was upped to 799 million tons.

**All subsequent references to supply and demand estimates are attributable to the March WASDE report**

Data sourced from USDA’s March 2024 WASDE report

Corn follows a similar pattern

Corn is following a similar pattern to wheat, with prices coming off a bottom in February when prices briefly broke below the 400’0 level. Now prices are up nearly 3% this month, putting it on track to break a 3-month losing streak. That bottom is also coming off the lowest level since November 2020.

Does the WASDE data support a fundamental case for the bottom being in? The U.S. outlook was unchanged in the report, but globally, coarse grain production for 2023/24 was forecasted at 2.8 million tons to the downside at 1,507.4 million tons. Ending stocks were also trimmed, with declines in production coming from South Africa, Ukraine, Mexico, and Russia.

Given the extreme price levels, this might support some further upside in the short term.

Similar to wheat, corn trader positioning is also at extreme levels. While shorts reduced their exposure slightly last week, short speculators have the largest position since April 2019, putting a short-covering rally on the cards.

Soybeans the best bet for March?

Soybean futures (/ZSH4) are up nearly 5% this month in the best performance so far on a monthly percentage basis since February 2022. The commodity is coming off the lowest levels since November 2020 and looks poised to offer the best chances for a trend reversal out of the three commodities discussed in this article.

Globally, oilseed production was trimmed by 0.7 million tons to 658.7 million tons, and the 2023/24 soybean supply estimates were for lower beginning and ending stocks and lower production.

Global ending stocks for soybeans were cut by 1.8 million tons to 114.3 million tons, with higher Chinese stocks partially offsetting lower Brazilian stocks.

Thomas Westwater, a tastylive financial writer and analyst, has eight years of markets and trading experience. @fxwestwater

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