The soybean long liquidation continues with November soybeans finishing 24 ½ cents lower at $12.57 ¾.  July wheat closed 20 cents lower at $6.65 ½ and December corn closed up a penny at $5.23.

This is a continuation of yesterday for soybeans and now we are down below the 200 day moving average in the November contract for the first time since February 23^rd.  The strong dollar and weak equities also made it difficult for grains to hold support as it was generally a "risk-off" trading session.

Chart: November Soybeans (red – 50 day, blue – 100 day, grey – 200 day)

The weather is expected to be warm and dry over the weekend across the Midwest but favorable rains are expected next week.  Crush margins in China are currently negative and is contributing to the soybean weakness.  The export demand came in all at once and it has now slowed.  With an already massive long position held by the funds there wasn’t much new information to "feed the bulls".  We are below many of the short term major moving averages in July soybeans and the next one to look for is the 100 day at $13.42 ¾ and the 200 day at $13.07 ½.

Chart: July Soybeans (red – 50 day, blue – 100 day, grey – 200 day)

July corn rallied back above $6 today which may have been partly from spread liquidation where traders were selling out of long beans and buying back short corn.  We did see Ethanol production uptick again for the 4^th week in a row but we also saw stocks go up as well.  For now we expect continued resistance in new crop corn on any rallies.

Tomorrow morning we will have the Weekly Export Sales Report.  Industry guesses are as follows:

Corn                                   900,000 – 2,000,000 MTs

Soybeans                            700,000 – 1,100,000 MTs

Wheat                                400,000 – 800,000 MTs

Source: Dow Jones

After the grains closed at 2 pm, we had a sharp rally in the equities and a slight break in the dollar.  This should be generally supportive for the grains when they re-open at 5pm CST. If you would like a free trial of the EHedger research please click on the link below.  To discuss opening a futures/options account please contact EHedger at 866-433-4371.  Thanks have a great rest of the week!

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Trading commodity futures and options involves substantial risk of loss and may not be suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge and financial resources. The market information contained in this message has been obtained from sources believed to be reliable, but is not guaranteed as to its accuracy or completeness. Market information may not be consistent with current or future market positions of EHedger LLC, its affiliates, officers, directors, employees or agents.

Sharp moves today in grains with a selloff in beans and a huge rally in wheat.  July corn closed 10 ½ cents higher at $6.35 ½, July soybeans 33 cents lower at $14.05, and July wheat 37 ½ cents higher at $6.95 ¼! 

The same story continues in the wheat today: funds shortcovering along with dryness concerns in Russia.  July wheat managed to surpass the 200 day moving average (see chart) today which is the first time since September 1^st.

Chart: July Wheat 

The corn was also stronger following the wheat market.  The corn vs wheat feed story has been going on for the past year and the last USDA Supply and Demand report shows the significant switch over to feed grade wheat in the world demand numbers.  Wheat hasn’t been this high to corn in the front month contracts since this time last year!

Chart: Corn – Wheat

The soybean spreads have had some very large swings in the past couple of days.  On Monday the July – November spread was trading as low as +73 ¾ cents, yesterday it hit a high of +$1.34.  Now we are back down to $1.17.  These are major moves for the old crop – new crop markets and the choppiness is expected to continue.  We know that the funds have been loaded up with net long soybean positions.  Today’s COT report shows the managed money reducing their net long position by 12,239 soybean contracts (as of Tuesday).  This still leaves them net long 218,088 contracts!

For now we want to remain with our current EHedger recommendations.  The last thing I wanted to mention is the change to the CME grain trading hours. I know they have changed the hours 3 times over but now it looks like we have something set in stone.  They will open on Sunday night at 5pm and trade electronically until 2pm (a 21 hour trading day).  Here is the email I received from the CME group this afternoon:

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Trading commodity futures and options involves substantial risk of loss and may not be suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge and financial resources. The market information contained in this message has been obtained from sources believed to be reliable, but is not guaranteed as to its accuracy or completeness. Market information may not be consistent with current or future market positions of EHedger LLC, its affiliates, officers, directors, employees or agents.

Grains continued their rally higher on further bull spreading and dry weather concerns in Russia.  July wheat led the way finishing 19 cents higher at $6.57 ¾.   July soybeans finished 16 cents higher at $14.38 and July corn 5 cents higher at $6.25.

The grains held support today despite the selloff in the outside markets like the Dow and Crude oil.  We had the strongest rally in Chicago wheat as the Russian weather bureau forecaster is calling for a "considerable size area" under fire weather warning through the 19^th.  One day after the latest FOMC minutes we are finding treasuries and gold sharply higher.  The fact that the Fed is hinting towards another possible round of Quantitative easing could bring support into commodities as the market tries to own "hard assets" as an inflation hedge.

With stronger ethanol numbers yesterday and stronger CIF basis today, corn was able to continue it’s "bullspreading" pattern to finish the July – Dec corn spread at + 96 ¾ which is the highest level it has been since report day (May 9^th).  July – November soybean spreads were so strong they actually made new spread contract highs at +$1.34!  This is despite the fact that both corn and soybean export sales were below the estimates this morning.  Soybeans did have a sale announcement of 480,000 MTs of old crop to China which contributed to this strength.

As I said yesterday, Chicago wheat was the one contract the funds were heavily short in (beside Nat Gas) and as soon as they have to short cover it can mean additional strength.  Open interest dropped by almost 10,000 contracts from yesterday’s trade so all signs are pointing to fund liquidation of short wheat positions.

Chart: December Corn  

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Trading commodity futures and options involves substantial risk of loss and may not be suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge and financial resources. The market information contained in this message has been obtained from sources believed to be reliable, but is not guaranteed as to its accuracy or completeness. Market information may not be consistent with current or future market positions of EHedger LLC, its affiliates, officers, directors, employees or agents.

Grains finished sharply higher with the front month contracts leading the way again.  July wheat was the strongest finishing 30 ¼ cents higher at $6.38 ¾, July corn 22 ¾ cents higher at $6.20, and July soybeans 9 cents higher at $14.22. 

Short covering in the wheat market helped spur the July Chicago wheat contract to rally up and settle directly on its 50 day moving average.

Chart: July Chicago Wheat (red line is the 50 day moving average)

Dry weather in Russia is the main headline behind today’s rally.  Last week’s report showed a large decrease in world wheat ending carryout from larger feed demand.  The last COT report shows the funds still net short 46,187 contracts of SRW wheat using futures and options.  With such a large spec short in wheat this leads me to believe that these were exiting positions, but we will have to see what open interest did.

Corn was also sharply higher today which was in large part due to the wheat rally.  The discount wheat has held to corn for the past year has forced some international demand away from US corn.  Obviously if wheat gets to a large premium to corn again, we could see demand for US corn go up.  Corn also had slightly "bullish" ethanol numbers as well as some export business reported by the USDA.  The EIA ethanol numbers at the 9:30 am open showed higher production and lower stocks.  This is the third week in a row that we have seen an increase in ethanol production and haven’t seen production this high since March 2^nd.  The USDA export sale announcement was a little deceiving this morning showing a sale of 900,000 MTs of US Corn to China between old crop and new crop.  It was actually only 240,000 MTs of new crop that was sold and the rest of it was just previous demand that was switching from "unknown destinations" over to China.

Soybeans had a large selloff overnight only to come back to positive territory during the day session on heavy bull-spreading again.  The July–November soybean spread is back to +$1.19 ¾ on today’s settlement which is not far from its $1.33 high from April 27^th. 

Chart: July – November Soybean Spread 

With corn planting well ahead of schedule and a massive amount of corn acres, there is not a whole lot that can be viewed as "bullish" for new crop corn right now.  The USDA increased demand by over a billion bushels on the last Supply and Demand report and they still have carryout expected to be over 1.7 billion.  This leaves the market with plenty of leeway on national average yield.  For the corn market to rally from here it would most likely have to be a large impact weather event.  Obviously today it was also helped out by a sharp move higher in the old crop.  The next target to sell Dec corn is at the 50 day moving average of $5.41 ¾ if it can get there.

Chart: December Corn  

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Trading commodity futures and options involves substantial risk of loss and may not be suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge and financial resources. The market information contained in this message has been obtained from sources believed to be reliable, but is not guaranteed as to its accuracy or completeness. Market information may not be consistent with current or future market positions of EHedger LLC, its affiliates, officers, directors, employees or agents.

Soybeans have continued their downward selloff from last week closing 19 cents lower in July and 26 ½ cents lower in November on heavy volume.  November soybeans are back below $13 which we haven’t seen a November soybean close below that level since March 12^th.  July corn held support finishing 2 cents higher at $5.83, and July wheat 1 ¼ cent higher at $5.98 ¼.

Over the past couple of months we have pointed out just how large of a long position the "managed money" has been growing/holding in soybeans.  At this point it is pretty clear that we are seeing liquidation in these markets especially in soybeans which is driving them lower.  On Friday we got the latest glimpse of their actual positions and saw that they reduced their net longs by 23,561 contracts but are still holding a net 275,328 long contracts using futures and options!  This is still a massive long position that adds quite a bit of downside potential.  For November soybeans, the next major moving averages where we may find support are at the 100 day which is at $12.83 and the 200 day at $12.67 ¼ (see chart). 

Chart: November Soybeans 

December corn was able to hold support today despite sharply lower outside markets and lower soybeans.  This could be another product of spread-liquidation as buying soybeans and selling corn has been a large trade since the beginning of the year.  We briefly traded below the psychological $5.00 level on Friday but had less than a 10 cent range today.

Chart: December Corn   

After the day session closed the USDA released their Weekly Crop Progress worksheet as scheduled.  Corn is now projected to be 87% planted and 56% emerged!  This is well above the 5 year average pace for this time at 66% planted and 28% emerged.  The same goes for soybeans with a national planting pace of 46% (average 24%) and 16% emerged (average 5%).  Winter wheat crop condition did drop by 3% in the good-excellent categories but is still at 60%.

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EHedger 

866-433-4371

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Trading commodity futures and options involves substantial risk of loss and may not be suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge and financial resources. The market information contained in this message has been obtained from sources believed to be reliable, but is not guaranteed as to its accuracy or completeness. Market information may not be consistent with current or future market positions of EHedger LLC, its affiliates, officers, directors, employees or agents.