Grain Futures Bounce Overnight on Weather

April 24, 2014 03:19 AM

The news pipeline this morning in terms of discussion amongst traders could be referred to as sluggish -old. For the grains it is all about late planting of corn, and traders still does not seem interested in the destruction of some plains wheat due to weather. Export net sales report is due this morning. And livestock remains with the old news tight cattle supply and hog PEDV status. And finally for economy news there will be the Durable Goods report today. Other than that it seems the slight positive economy news trend was still intact.

India's government weather office stated that if El Nino will have an effect on the monsoon season then expect below normal precipitation. Monsoon rains were forecast to be 95% of normal. Trader based discussion also included the possibility that an El Nino event means less precipitation for Australia. While the U.S. with an El Nino event would likely see positive crop production biased weather in the corn belt. Some forecasters assume El Nino status can be achieved as soon as June in U.S. Trend line yields or better are more likely in the corn belt than during La Nina climate events.

And so with light news traders follow the technicals more and consider overall price trend versus the trend of past news. Past news suggests a growing economy with some positive regional U.S. business statistics trumping soft regional statistics. Traders also discuss the robust recovery of the stock market in recent days and following a dramatic stumble during early April.

Traders also discuss this week's pop in corn prices while old crop soybean futures prices declined faster than new crop futures prices therefore creating a coinciding drop of the spread. Some traders attribute the spread decline to profit taking when those long JUL or MAY and short NOV futures exited some of their positions. Profit taking. This may have had something to do with U.S. corn planting pace report this week showing 6% planted when reported average trade guess suggested a desired 9% planted. Then add the next cyclical round of cooler weather forecast and it is feasible some traders decided to buy corn and sell beans.

And now for some technical discussion. Traders considered violation of JUL soybean's 5 day average as bearish and when the violation occurred following some standard short term indicators as overbought. The 5 day average is now considered nearby resistance at $14.87. The same could be said for JUL soymeal with the 5 day average at $474.9 as of overnight trade. JUL SRW Chicago wheat futures on the other hand spiked above the 5 day average during overnight trade. It is clear that wheat found some demand from the 40 day average near $6.79. And to wrap up grain discussion the overnight JULcorn trade was higher and well above the 5 day average near $5.01. and corn did begin the current rally following touching the 40 day average which is currently near $4.95.

Technical trade for DEC cotton still offers a strong up trend but with overbought indicators. While cattle stalls near the 5 day average at 134.95 and the 40 day average as major resistance near 136.15. JUN hogs rallied from 40 day and 5 day averages merging around 124.00, a now assumed support level.

Rich Posson's business cycle model stance suggests the short term trend is up for corn and wheat but the next larger trend offers eventual decline into May. Soybeans decline for a short term cycle trend and are due to rally by next week for the same type of trend and then a larger trend should be down during May. Cattle and hogs are due for a rally into May and the next important top may not arrive until late May. However, new record highs are not forecast, but allowed. Old crop JUL cotton seems range bound while the recently stronger new crop DEC is due for a major intra-year cycle trend top, which suggests demand to back off a bit in coming weeks. Model based research had sought 82 cents and higher for DEC, and as of this week the objective was met. A bit over valuation is likely present. And finally, as of yesterday, Pro Farmer sold DEC cotton.



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