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Grain Futures Post Recovery Overnight

07:51AM Apr 22, 2014



Traders weigh planting pace of U.S. versus 2014 production potential versus current status of demand. And speculators change strategy.


Speculators of commodity ETFs (Exchange Traded Funds) reduced investment in broad-based commodity funds and increased investment in commodity funds that specialize in a few or even just one commodity. Traders assume this is a sign of investor interest to be of a selective strategic mindset. Investors are likely to focus on the micro economics per commodity and seem to still be of a long bias when trading. The latter suggests the investors see macro economy bullish prospects meaning they favor a growing economy, but are more interested in the individual commodity that will benefit the most from a growing economy. Although so far 2014 investors were more interested in individual commodities, in recent days there was news of funds taking some profits. Funds sold corn and sugar yesterday and purchased soybeans.


Corn planting pace was set last night by USDA at 6% planted when traders expected 9%. Ahead of last night's report July corn futures declined to below the 40-day moving average and closed slightly above the average and when some technical traders opined that short term indicators were oversold, which in turn implied a chance for a bounce from that average. Overnight traders apparently were a bit concerned of the slower-than-expected planting pace and followthrough with additional rally from the 40-day average ($4.93 JUL). Wheat plummeted yesterday but closed in respect to the 40-day average ($6.75 July SRW-Chicago) and was a bit higher during overnight trade. While soybeans and soymeal appeared to have found support at the 5 day average $14.90 and $475.5 respectively and relative the July futures.


Rich Posson's business cycle model based opinion offers a 1 to 3 day bounce for wheat and corn followed by another short term leg lower. Traders should watch for resistance near the 5-day average near $5.02 July, and for wheat consider $6.92 July SRW. Soybeans and meal on the other hand are with potential to rally into next week. However, a daily close under the current low of this week for any grain could be at least a short-term negative sign. And the model-based research is of a negative stance for at least some of May. Traders will continue to monitor planting pace, weather, and compare this information to current trend of domestic and global demand.

Traders are likely talking about June cattle futures with a pop from yesterday into today but with price at a trend line of resistance that dates back to March 28 the current high of the year. That resistance is near $134.75 and followed by 5-day average at $135.225, and 40-day average near $136.00. And hog traders are excited over an overnight break of the 40-day average basis June futures and at $122.916. Rich Posson's business cycle model stance is for trade to $120.00 or lower.