Has Wheat Bottomed?
Nov 29, 2017
Yesterdays Close: March corn futures closed 2 ¼ cents lower yesterday, this after trading in a range of 3 ¼ cents on the session. Funds were estimated to have been sellers of 9,000 contracts on the day.
Fundamentals: The USDA released baseline figures for the 2018/2019 corn crop, they have plantings at 91 million acres with production at 14.52 billion bushels. This projection puts yields at 173.5. Side note: the USDA has underestimated yields by an average of 4.5 bushels per acre over the last four years. December futures go off of the board today; some analysts are suggesting that we could see prices firm post expiration. Although we may, we also may not, this is a reach for a silver lining in our minds. We will be monitoring weather developments in South America closely. Rains have worked their way into the forecast for some areas of Argentina, but weather models are suggesting it dries back up in 1 ½-2 weeks out.
Techncials: March futures have gravitated towards the 350 level recently, a big magnet for the December contract which goes off of the board today. We would not be surprised to see some consolidation around this level until we get a new fundamental catalyst to give us a breakout or a breakdown. First technical support comes in at 348 ¾, a break and close below could extend the selling pressure towards 334-335 ½. On the resistance side of things, the first line in the sand comes in at 354, but the more significant level comes in at 360 ½ this morning. This represents the 50-day moving average, although it is a simple indicator, we have not seen the market close above this since July. If the bulls can achieve consecutive closes above, we could see funds start to cover SOME of their near record short position.
Resistance: 354**, 360 ½****, 367-369 ¼**, 373 ½-375****
Support: 348 ¾**, 334-335 ½***, 323-325 ¼**
Yesterdays Close: January soybeans closed 2 ¼ cents lower yesterday after trading in an 8 ½ cent range on the day. Funds were estimated to have been sellers of 3,000 contracts on the session.
Fundamentals: The USDA released their baseline figures for the 2018/2019 crop yesterday. They show 91 million acres planted with production at 4.36 billion bushels. This puts their yield at 48.4; side note: the USDA has under estimated yields by an average of 2.775 bushels per acre over the last four years. Weather outlooks in Argentina became more favorable in the very near term, but some forecasts are suggesting concerns will resurface within the next two weeks as drier weather works back into the models. We will continue to monitor weather in South America and keep you updated on changes. Tomorrow morning, we will be back on schedule for the release of the weekly export sales.
Technicals: Yesterdays price action was encouraging for the bulls as prices managed to close off the lows. However, weakness has crept back into the market this morning and we could see the market make a run back towards our first technical support pocket from 982 ¾-986. This pocket represents the 50 and 100 day moving average, along with the 50% retracement (middle of the range) from the June lows to the July highs. We feel this is an opportunity to look to the long side on the first test. If we break and close below support, we could see long liquidation from the funds press us back towards the bottom end of the range at 968. As mentioned earlier in the week, the market has been mostly range bound between 970-1000 over the past three months. Although we see the market is range bound, we still have a bullish tilt in our bias for the time being.
Resistance: 999-1004 ¾***, 1014**, 1021 ½****
Support: 982 ¾-986***, 968 ¼****, 957-963 ¼****
Yesterdays Close: March wheat futures closed up ¼ of a cent yesterday after trading in a range of 7 cents. Funds were estimated sellers of 500 contracts on the session.
Fundamentals: The USDA released its preliminary forecast for the 2018/2019 season yesterday, all wheat acres is at 45 million acres with production coming in at 1.815 billion bushels. The market has continued to be under pressure due to ample global supplies; nearly every continent produces wheat, and most are doing so very efficiently. We will need to see a fundamental shift in demand to help support this market.
Technicals: yesterday’s reversal off of technical support could be seen as encouraging for the bulls, but that may be reaching a bit. As mentioned earlier in the week, rallies are likely to be due to short covering and should be sold until we see a technical breakout. First technical resistance today comes in from 433 ¾-435, with the more significant levels coming in closer to the 450 level which represents recent highs and the 50-day moving average. As with corn, the 50-day moving average is a simple indicator but significant to us as we have not seen the market close above since July. Consecutive closes above could encourage new buying and not just short covering.
Resistance: 433 ¾-435**, 445-447****, 452 ¾**, 478-479****
Support: 422 ½**, 412 ¾***, 399-402 ¾****, 390-392 ¼**
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