The data told us what we already knew: the funds were selling the market. The Tuesday-to-Tuesday jump was close to 2,500 contracts. That could do some damage… and it did.
The industry used the break to liquidate shorts and add longs. By Friday, the market was $20 lower, causing many to start to second-guess their move.
This is not a bad level to be long from a fundamental perspective. The issue is how much more selling the funds have left before the roll begins. Most of the time, they will slow or stop outright selling and simply roll their position forward. After such a substantial selloff, I tend to agree with that view.
The debate now is about how much damage this selloff did to the market. Many are flipping that question around and asking, “How much damage did the false rally do?”
Going into the rally, supply was contracting at roughly the same pace as demand, creating a flat but tradable range. Producers were back in the black, and the industry was enjoying improved margins.
The rally disrupted the contraction plans of many producers, and now we are back to waiting for supply to contract once again.
Trading: With the RSI sitting at 14.20%, look for a bounce. Please note that this is the third Sunday I have said that, and the market is roughly $40 lower than when I first made the call. The funds have been relentless, but they do have targets. Mill breakevens and seasonal factors are part of the equation.
If they begin to roll their positions, futures could bounce back toward the $600 area. There are no clear value targets while the funds remain active participants. Instead, we go back to prior reference points where 596 was relevant, followed by 607 and the 618 area.
This downside break damaged several technical structures, and with meaningful economic help still out of reach, the funds may not be finished with the November contract. Housing remains unaffordable, and the industry is not underbuilt. It seems only the funds see it.
The White Sox are in first. That means the futures can rally.
Daily Bulletin:
https://www.cmegroup.com/daily_bulletin/current/Section23_Lumber_Options.pdf
Southern Yellow Pine:
https://www.cmegroup.com/markets/agriculture/lumber-and-softs/southern-yellow-pine.volume.html
The Commitment of Traders:
https://www.cftc.gov/dea/futures/other_lf.htm
About the Leonard Report:
The Leonard Lumber Report is a column that focuses on the lumber futures market’s highs and lows and everything else in between. Our very own, Brian Leonard, risk analyst, will provide weekly commentary on the industry’s wood product sectors.
Brian Leonard
bleonard@rcmam.com
312-761-263
Soybeans had a positive report reaction even though the headline numbers were less bullish than corns. USDA pegged the 2026 bean yield at 52.7 bushels per acre, just a touch below the average trade estimate of 52.9 and down slightly from last year’s final 53.0, but a 1.4-million-acre increase in planted area pushed total production to a record 4.519 billion bushels, up 6% from 2025. Ending stocks were actually raised across the board versus trade guesses, both old-crop (325 million bushels) and new-crop (320 million bushels), which would normally read as bearish, but the broader complex strength and a genuinely encouraging demand backdrop carried beans higher. That demand backdrop has real teeth behind it: China has stepped back into the market with five separate flash-sale announcements since August 3, totaling roughly 1.12 million metric tons in the past week alone, and outstanding 2026/27 sales to China stood at 3.11 million metric tons (114.3 million bushels) as of July 30, about 12% of a rumored 25-million-metric-ton full-year purchase target. The crop is far from finished, with 62% of the nation’s beans setting pods as of August 2 and good-to-excellent ratings at 63%, down 6 points from a year ago, so timely August rain during pod fill remains the key variable to watch.
Wheat was another big mover on report day, up 20 to 13 cents across contracts with September futures trading near $6.34. The USDA numbers themselves were fairly neutral to modestly bullish, with all-wheat production pegged at 1.531 billion bushels versus a 1.525 trade estimate and 2026/27 ending stocks trimmed to 717 million bushels from 722 million in July, while world stocks were nudged higher to 273.25 million metric tons. The bigger story for wheat over the past two weeks has been the Black Sea, where intensified Russian and Ukrainian drone and vessel attacks on grain terminals, including a strike that halted operations at Novorossiysk. Ukraine has trimmed its 2026/27 grain export forecast by as much as 12%, and Russian wheat exports are now expected to fall to their lowest level in nearly a decade, with IKAR cutting its export forecast by 500,000 tonnes to 44.5 million tonnes. Weak international demand and ample supply on paper have kept a lid on the rally so far, but the shipping-risk premium is a real and growing factor heading into the peak Black Sea export season.
