What do a Couple of Carls Have to Say About Wednesday's "Market Moving" Government Numbers?

• In the Financials sector, markets are reportedly waiting for the US government to tell us if inflation is really a problem through the July CPI and PPI numbers. 

• In Grains, we have USDA's August WASDE numbers expected to trigger algorithms. 

• However, the Wheat sub-sector already jumped overnight on big trade volume.

Morning Summary: Wednesday session is brought to you by a couple of Carls. First, as I mentioned earlier this week, today’s docket is filled with government numbers, “data” that is eagerly anticipated by folks in nearly every sector of the investment community based on the belief that markets only work if driven by government agencies. They view these reports as if part of a religious rite, like manna from heaven. Given this, and as I wrote about in January 2025, we should keep in mind what Karl Marx had to say on the subject, “Religion is the opiate of the masses”. True words for what we will see play out today. In the Financials sector, early morning headlines scream, “An inflation report Wednesday should be a big deal for the Fed…” and “Treasury yields are little changed as investors await key inflation data”. Maybe you are asking, “What’s all the hubbub Bub?” The July Consumer Price Index (CPI) is set for release this morning followed by Thursday’s July Producer Price Index (PPI). But if we take a step back across the threshold into reality, do we really need the US government to tell us if inflation created by tariffs (aka consumer taxes), trade wars, and real wars isn’t a real problem? 

Corn: In the Grains sector, the majority of the industry is wetting itself over the next set of USDA WASDE numbers set for release at noon (ET)^[i]. Given Watson will likely be triggered by where USDA’s numbers fit within the range of pre-report estimates, I asked Barchart’s CARL what those numbers were, starting with corn.

• Total Production: Pegged at 15.934 billion bushels on average, down from the July estimate of 16.0 bb
• National Average Yield: Analysts expect the USDA to trim the national yield to 182.4 bpa. Individual private estimates range from 180.5 to 184.8 bpa.
• New-Crop Ending Stocks (2026/27): Expected to tighten toward 1.725 bb (down from 1.79 bb in July).

What other numbers might Watson be looking at today? Dec corn is oversold, based on daily stochastics running below 20%. Given Dec26 closed 5.0 cents lower for the Tuesday-to-Tuesday positioning week, funds likely decreased their net-long futures position, last reported at 255,070 contracts. Dec26 has held technical support near $4.60, again based on daily closes only, with its 90-day moving average up near $4.70 Wednesday. Fundamentally, the Dec-March futures spread covered a neutral 52% calculated full commercial carry at Tuesday’s close. For the record, Dec26 (ZCZ26) is up 4.5 cents, at $4.65 interestingly enough, to start the day. 

Soybeans: Over in soybeans the November issue (ZSX26) is sitting 6.0 cents higher pre-dawn Wednesday. CARL’s answer on pre-report guesses for the soybean market was:

• National Average Yield: Expected to come in at 52.9 bpa, slightly below the July trendline of 53.0 bpa. Trade estimates range from 52.0 to 53.5 bpa.
• Total Production: Pegged at 4.472 bb, down slightly from July’s 4.475 bb but up from last year’s 4.262 bb.
• Old-Crop Ending Stocks: Expected to see a slight reduction to 324 million bushels due to strong export commitments (My edit: Really CARL? Strong export commitments? Ok.)
• New-Crop Ending Stocks: Estimates range widely from 250 mb to 387 mb (Should be a fun game of Pin-the-Tail-On-the-Donkey later today.)

In other news, Nov26 broke below its 85-day moving average Tuesday, based on daily closes only, when it closed at $11.6875. The 85-day was calculated yesterday near $11.7550. This was the first time since July 2 Nov26 had been below this technical trigger. However, Nov was sitting at $11.7450 as of this writing with the 85-day at $11.7550. Similar to Dec corn, Nov26 is oversold according to daily stochastics. Also, Nov26 closed the previous positioning week with a loss of 9.0 cents, all while the Nov-January futures spread covered a neutral 55% calculated full commercial carry. 

Wheat: As for the wheat sub-sector, the overnight session saw a strong rally in all three markets. December SRW (ZWZ26) was up 20.5 cents at this writing after rallying as much as 21.25 cents. December HRW (KEZ26) was sitting 26.0 cents higher, still 2.5 cents off its session high, and December HRS (MWZ26) was up 16.75 cents, 5.25 off its high mark overnight. It’s interesting to note there was an uptick in trade volume as well with Dec SRW registering 25,000 contracts, Dec HRW 10,000 contracts, and Dec HRS a whopping 1,350 contracts. (No, I’m not being sarcastic. That is big overnight activity for spring wheat.) Taking a break from pre-WASDE guesses, I ask CARL what sparked the rally in the sub-sector overnight: “Analysts are anticipating a tighter global balance sheet…” Umm…again, okay. I will remind CARL the September-December SRW spread closed Tuesday covering a bearish 74% calculated full commercial carry with the Dec-March catching up fast covering 73%. Neither hint at a tightening global balance sheet, but again, reality isn’t as important as fantasy. Next came, “Technical buying and short-covering”. This is possible given Watson likely increased its net-short futures position in SRW this past positioning week given December closed 7.0 cents lower. 
 

^[i] I’ve said it before and I’ll say it again: To understand what drives USDA’s grain reports, keep in mind they are the only ones released during trading hours. It’s not about fundamental transparency. It’s about trade volume. Nothing more. Nothing less.