The most significant non-fundamental change for agriculture markets last week was the sharp deterioration of the macroeconomic environment. 

The primary drivers for last week's negative macro mood: Rising global Covid-19 cases & lockdowns + amplified U.S. election risks + Fed Chair Powell's pessimism + Congress' failure to pass new stimulus. 

Crude oil dropped -2.9% on the week, the S&P 500 lost -0.6%, USD strengthened +1.8%.

This risk-off trading (and potential for more over the coming weeks) drove traders to trim their massive long bets in agriculture futures. Expensive and overbought markets got hit hardest: soybeans dropped -3.9% last week, canola seed -3.8%, chicago wheat -5.3%. 

Macro catalysts this week include the last big jobs report before the U.S. election: 

• Tuesday: First U.S. Presidential debate between Trump & Biden in Cleveland

• Wednesday: USDA Quarterly Stocks report, Chinese PMI data, U.S. ADP job #s.

• Thursday: China's Golden Week begins, U.S. jobless claims and continuing claims data

• Friday: Monthly U.S. NFP jobs report (exp. +850k jobs, unemployment rate 8.2%)

Hedge funds are still LONG ag futures - even after last week's macro-driven trimming - and this extended fund positioning is a bearish trading input looking forward. Today's +640k contract aggregate non-commercial trader position is the longest net fund position since February 2017. 

Price seasonals turn bullish into October - Peak's seasonal heat maps (chart of the week below) are a sea of green for the coming weeks. The big caveat this year: ag futures have already seen a broad price rally in August & September...it's less likely we'll see an October post-harvest bounce starting from these levels. 

What matters this week:

Fund positioning is bearish, seasonals are bullish, and the (currently negative) macro environment will play an important x-factor this week for agriculture markets. 

To keep it simple: Watch price action in crude oil & inflation expectations and watch the U.S. dollar, especially around the U.S. employment reports later in the week.

Chart of the Week: Price seasonals are strongly bullish in October - Peak’s weekly seasonal heat maps are a sea of green for the coming weeks. Is some of this bounce already priced in after September’s counter-seasonal rally?

For a trial of our industry-leading agriculture research, reach out to us: insight@peaktradingresearch.com.