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Should you hedge before the USDA report?

Published on: 14:20PM Nov 08, 2017

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CORN (December)

Yesterday’s Close: December corn futures closed ½ cent lower yesterday, spending the entire session in a 2-cent range.

Fundamentals:  We saw an export sale of 130,000 metrics tons for delivery to “unknown destinations” yesterday, this is for shipment in the 2017/2018 marketing year.  Today is Wednesday which means we will get our weekly EIA ethanol report, we will have those numbers in tomorrow’s report.  A Ukrainian analyst lowered their domestic production for 2017 due to weather affecting yields.  Their estimate is for production to be at 25.5 million metric tons, this is a decrease of 500,000 metric tons.  The focus for the remainder of the week will likely be on Thursdays USDA report which will be released at 11 am cst.  With volatility so low, this may be an opportunity to look at some different option strategies for hedging or speculating, get a hold of us to discuss this in more detail.  The average analyst estimates for yields come in at 172.4 bushels per acre, this is up .6 from the last WASDE report (World Agricultural Supply and Demand Estimates).  Post report, attention will move to South America where planting rolls onwards and the crop starts to develop. 

Technicals: The 50-day moving average is starting to flatten out but still subtilty drifting lower.  This has been a big resistance indicator for us over the past two months and will continue to be.  This comes in at 351 this morning, but the significant resistance level we are now eyeing is 355 ¼.  A close above 355 ¼ could encourage funds to reduce a portion of their very large net short position.  On the support side of things, last week’s lows will be pivotal for chart watchers.  Last week’s lows come in at 345 ¼, a break and close below will likely lead to new contract lows.  Market participants are hopeful that this week’s USDA report could be the catalyst for a breakout or a breakdown, anything but a continued sideways trade.

Bias: Neutral

Resistance: 351 ¼**, 355¼***, 360-362***, 372-375**

Support: 342 ½-345 ¼**, 334-335 ½***

 

SOYBEANS (January)

Yesterday’s Close: January soybean futures closed up 2 ¼ cents yesterday, trading in a range of 7 ½ cents on the session. 

Fundamentals:  Thursdays USDA report will be the focus for the remainder of the week. With volatility so low, this may be an opportunity to look at some different option strategies for hedging or speculating, get a hold of us to discuss this in more detail.  The average analyst estimate is for yields to come in at 49.3 bushels per acre, this would be a decrease of .6 bushels per acre from the October WASDE report.  We will have a convenience table for you before and after the report.   After the report is released, will continue turning towards South America where they continue to plan and start to enter their crop developmental stages.  Weather will be the hot topic for Argentina and Brazil. 

Technicals: January soybeans are seeing some follow through in the early morning trade but are right up at our resistance pocket from 999 ¼-1004 ¾.  As mentioned in yesterdays “Closing Comments”, this is an opportunity to reduce some long exposure; if you’re a producer that means looking at some hedges knowing that there is a USDA report on Thursday this is the prudent thing to do.  If the market can achieve a close above, we could make a run towards 1021 ¼.  If we get a bearish report, we could see long liquidation from funds press us back towards technical support.  Bulls will remain in control so long as 979 ¼ holds on a closing basis, a break and close below will change our bias.

Bias: Bullish

Resistance: 999 ¼-1004 ¾**, 1014**, 1021 ¼****

Support: 989**, 984 ¾**, 979 ¼-980 ¾***, 968 ¼****, 957-963 ¼****

WHEAT (December)

Yesterday’s Close: December wheat futures closed 3 ¾ cents lower yesterday, trading in a 7-cent range on the session. 

Fundamentals:  Improving crop conditions put some pressure on prices yesterday on thoughts that we could get better than expected yields.  This would come on top of a well-supplied global market with dismal demand.  Export sales will need to come in much better in an order to stop the slow bleed lower.  Low prices cure low prices so at some point one would think that lower prices would stoke up some global demand.  We are by no-means suggesting the bottom is in, just pointing out a silver lining in market where there hasn’t been much good to say.

Technicals:  Technically the market remains weak, the bears will remain in control until the bulls can achieve consecutive closes above technical resistance represented by the 50-day moving average.  The 50 day comes in at 438 ¼ this morning, this is an indicator we have not seen the market close above since July.  422 ½ is first technical support this morning, a break and close below could lead to yet another new contract low.

Bias: Bearish

Resistance: 438 ¼** 443***, 462 ¾**, 478-479****

Support:422 ½**, 415 ¼**, 399-402 ¾****, 390-392 ¼**

 

If you have any questions with regards to markets, trading, or opening an account please let me know!

If you are interested in receiving our morning updates and are not yet on the distribution list, please email Oliver@BlueLineFutures.com.

You can also reach us at 312-278-0500

 

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Futures trading involves substantial risk of loss and may not be suitable for all investors. Trading advice is based on information taken from trade and statistical services and other sources Blue Line Futures, LLC believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder. Past performance is not necessarily indicative of future results.

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