Morning Grain Commentary from Blue Line Futures
Oct 18, 2017
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Session Close: December corn futures closed ¾ of a cent lower yesterday with futures trading in a range of 3 ¼ cents on the session. Funds were sellers of 1,500 contracts.
Fundamentals: The market has reverted back to its old ways and that means not moving. The USDA did announce a few sales yesterday, one of 115,000 metric tons to Mexico for 2017/2018, and another for 146,000 metric tons to Unknown for 2017/2018. Harvest progress will continue to be monitored closely, along with yield numbers that come a long with it. Much of the corn belt is behind the average harvest pace, but a break in weather over the next week should provide an excellent opportunity for producers to make up ground. Weather in South America will also be watched closely, it appears they will also be seeing better weather for the back half of October as well. Brazil is estimated to be 44% planted, this is 6% behind last year’s pace. NAFTA talks between the US, Canada, and Mexico yesterday were unproductive and will continue to extend efforts to renegotiate into 2018.
Technicals: It’s the same story, just a different day; the volatility is non-existent as corn futures continue to trade in a relatively tight range. The market seems to have found a near term equilibrium right near the 350 level, we will need to see a fundamental catalyst for the next directional breakout or break down. On the resistance side of things, 355 ¾ is the first line in the sand. This represents the 50-day moving average, an indicator we have not closed above since July. Support in the market comes in from 342 ½- 344 ¼, which represents the recent low and closing low. With the market right in the middle of its 10-cent range, we have moved from bearish to neutral. Although some people get frustrated with low volatility, it is often a time to start looking for opportunities in the options market (on the buy side).
Resistance: 355 ¾-356 ¼**, 360-362***, 372-375**
Support: 342 ½-344 ¼**, 334-335 ½***
Session Close: November soybean futures closed 5 ¾ cents lower yesterday with futures trading in an 8-cent range. Funds were sellers of 4,000 contracts.
Fundamentals: The market has come off of last week’s highs as producers looked to lock in higher prices. Good weather here in the states has also added to some of the recent weakness as forecasts show better weather over the next week. If things do dry up, it should offer an opportunity for producers to close the gap on their slower than average harvest pace for this time of year. Outside of the US weather, many market participants are also keeping an eye on weather in South America as they continue to plant. Brazilian beans are estimated to be 11% complete, this is in line with their average. There have been some concerns surrounding dryness in Brazil, but moisture has crept into the forecast which has also helped soften prices in the first half of the week.
Technicals: The market was not able to achieve consecutive closes above 993 ½ and that has led to some profit taking over the past two sessions. 975 ½-977 was resistance going into the USDA report, and that now becomes very significant support. This narrow pocket represents the 200-day moving average, as well as the middle of the range (50% Fibonacci) on the year. Bulls will want to defend this on a closing basis, a failure to do so opens the door to another leg lower and a test back to Trendline support from August, the 50-day moving average, 100 day moving average, and key Fibonacci retracement; all of which come in from 959 ½-963 ¼.
Resistance: 993 ½**, 999 ½-1003 ¼**, 1014****
Support: 975 ½-977****, 959 ½-963 ¼****, 939 ¾**
Session Close: December wheat futures closed 1 ½ cents lower yesterday, trading in a 7 ¼ cent range on the session. Funds were sellers of 2,000 contracts on the day.
Fundamentals: Wheat futures remain under pressure on the back of ample global supplies and lack luster export demand. Export inspections earlier in the week came in at 322,860 metric tons, this was below the low end of the estimated range. Export sales will be released tomorrow morning. Also on the radar for some market participants is weather. As with corn and beans, better weather has brought down the near-term price ceiling and helped to pressure prices. Planting is roughly 11% behind the five-year average but producers should be able to make up ground over the next week.
Technicals: On the technical front, not much has changed over the last 24 hours. The bears remain in total control of the market and the 50-day moving average continues to be the major barrier. As with corn, we have not seen wheat close above this indicator since July. If the can achieve a close above in the near term, we could see that spark a technical short covering rally, that comes in at 443 ¾ this morning. As we mentioned on RFD TV earlier in the week (and will mention again tomorrow), we are looking for a retest of the contract lows of 422 ½, that came in on August 29th.
Resistance:443¾-445 ¾***, 462 ¾**, 478-479****
Support: 428 ¼**, 422 ½****, 415 ¼**
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