While many of the agricultural markets are finding increasing acreage on a global basis thus decreasing U.S. domination, the corn market is still the primary domain of the U.S. agricultural markets. As such, the Chicago Mercantile Exchange Group’s corn futures contract is the primary hedging tool. As such, the actions of this market’s biggest players are tracked on a weekly basis by the Commodity Futures Trading Commission’s, Commitment of Traders (COT) report. Here’s how to use this report to determine market bias in advance of major governmental agricultural reports by the USDA and World Agriculture Board. While the illustration is based on the current events of the corn market, the methodology is robust across many commodity markets.
The USDA reports their global Supply and Demand figures this Friday at noon Eastern. This report frequently sets the tone for the rest of the year with the fast and wild action affecting the beans in the bin while the long-term effects play out on the beans in the ground. There’s no denying the seasonal effects of this report on both markets. Post June USDA Supply and Demand leads to one of the most predictable declines in seasonal market forecasting as beans fall through the end of July. Finally, the table is already massively stacked against bean prices with record acreage being planted with the expectation of record yields. Barring any unforeseen weather catastrophes, which are unlikely in our part of the world in an el nino year like this one, the 2014 US soybean crop should be a record setter by a wide margin. But….