By John S. Simpson Jr., March 19, 2025
The grain markets are currently displaying clear signs of sideways movement and, in my opinion, increasing weakness across key contracts. Despite brief rebounds, the broader trend lacks conviction, and market participants should be cautious. Here’s my updated perspective on corn, wheat, soybeans, and the soybean complex.
Corn: Turning Bearish
Corn futures (ZCK25) reached support at 442-4 on 3/04 and saw a brief rebound with a long entry at 461 on 3/06. However, the market has failed to hold gains, peaking at 477-4 before slipping back under pressure. Price action now suggests a bearish tilt, with downside risk increasing if prices break below 470 decisively. In my opinion, the fundamentals and technicals are pointing to a weakening trend.
Key Drivers:
- Ethanol demand remains steady but insufficient to offset mounting global supply pressures.
- Persistent dryness in Argentina offers little support.
- Fund positioning may begin unwinding, accelerating downside momentum.
Technical Indicators:
- MACD: Momentum has shifted bearish, reflecting weakening price action.
- MACD: Bullish momentum continues to build but lacks follow-through.
Soybeans: Sideways Movement in Flag Formation
Soybean futures (ZSK25) tested support at 995 with a low at 994 on 3/12 and rebounded with a long position at 1002. However, beans continue to face selling pressure, currently consolidating around 1010 in a flag formation. This sideways pattern suggests indecision, and in my opinion, any failure to hold above 1010 could lead to further deterioration.
Key Drivers:
- Chinese demand remains steady but shows signs of plateauing.
- Large Brazilian harvest weighs heavily.
- Biofuel demand supportive but not enough to lift the market alone.
Technical Indicators:
- MACD: Momentum has shifted bearish, aligning with current market weakness.
Soybean Oil and Meal: Bearish Tilt Emerging
Soybean meal (ZMK25) has broken out to the downside, confirming a bearish shift. In my opinion, this breakdown suggests the market is vulnerable to further selling, with the next target expected at 291 if demand continues to weaken, which would create a potential triple bottom formation.
Soybean oil (ZLK25) reversed to a long position at 41.81 on 3/17, but follow-through has been lackluster. In my opinion, the market needs to stay above 42.24 to maintain any bullish potential. Failure to hold this level could lead to renewed selling pressure.
Key Drivers for Soybean Oil and Meal:
- Tight supply narrative persists, but demand remains cautious.
- Range-bound trading behavior shows lack of conviction.
Technical Indicators:
- Soybean Oil MACD: Bearish momentum emerging, as upside follow-through remains limited.
- Soybean Meal MACD: Bearish momentum accelerating after downside breakout.
Wheat: Faltering After Brief Strength
Wheat futures (ZWK25) confirmed a long position at 555 on 3/12, breaking above 565. However, recent price action is showing signs of exhaustion, struggling to sustain momentum toward 579 and 595 targets. Traders should be cautious as the market appears vulnerable to profit-taking.
Key Drivers:
- Global supply concerns persist, but ample competition and weak export demand weigh.
- Dollar softness offers support but limited in offsetting structural weakness.
Technical Indicators:
- MACD: Momentum showing signs of weakening after recent rally.
COT Report Analysis
The latest CFTC Commitment of Traders (COT) report (March 15th data) shows:
- Corn: Managed money net long positions increased by 12,000 contracts week-over-week, though caution remains if weakness persists.
- Soybeans: Funds reduced short positions slightly, but longs are hesitant to add.
- Wheat: Funds trimmed short exposure by 7,500 contracts, though conviction appears light.
In my opinion, fund positioning shows reluctance to commit heavily to long positions, reflecting the market’s underlying weakness.
Macro Environment: The Dollar’s Influence and Outside Markets
While the recent decline in the U.S. Dollar Index has provided mild support, grains have struggled to capitalize. Outside markets remain robust, but the grain complex appears disconnected from broader bullish sentiment.
Final Thoughts
In my opinion, the grain markets are increasingly vulnerable. Corn and soybeans are at critical technical junctures, but price action has been uninspiring. Wheat’s rally appears to be faltering, and soybean oil and meal remain range-bound with no clear breakout. Market participants should remain cautious, recognizing the growing signs of weakness and lack of follow-through.
Until we meet again, may your journey be grand!
As always, this is just my opinion and should not be considered as financial advice. Market conditions can change rapidly, and it’s essential to stay informed and manage risk accordingly.
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John S. Simpson Jr.
Senior Market Strategist
Walsh Trading
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