Weekend Update (Grain & Livestock 8.12.18)
Aug 12, 2018
We will be on RFD-TV at 9:45cst tomorrow, tune in!
Corn: December corn futures finished Friday’s session down 11 ¼ cents, extending losses for the week to 13 ¾ cents after trading in a 17 ¼ cent range. Friday’s Commitment of Traders report showed funds bought back 27,588 futures through August 7th, trimming their net short position to 68,025.
USDA Report Recap:
Yield: 178.4 bushels per acre, up from 174 in last month’s report
Production: 14.586 billion bushels, up from 14.230 in last month’s report
New Crop Carryout: 1.636 billion bushels, up from 1.552 in last month’s report
Quick Take: Friday’s bearish USDA report was enough to erase gains from the previous two weeks, changing the fundamental, psychological, and technical landscape of the market going forward. We were wanting to be friendly the market, but you have to trade the market you have, not the one you want. The breakdown below support at 380 opened the door for a run at our 3-star support which we have coming in at 366 ¼-369. We would not be surprised to see this support pocket eventually give way. See tomorrow’s Grain Express for the full technical outlook.
Soybeans: November soybeans finished Friday’s session down 42 ¾ cents, extending losses of the week to 43 ¼. For the week, futures traded in a 53 ¾ cent range. Fridays Commitment of Traders report showed funds bought back 16,853 futures through August 7th, trimming their net short position down to 64,066.
USDA Report Recap:
Yield: 51.6 bushels per acre, up from 48.5 in last month’s report
Production: 4.586 billion bushels, up from 4.310 in last month’s report
New Crop Carryout: 638 million bushels, up from 580 in last month’s report
Quick Take: Friday’s USDA report was about as bearish as it gets which was reflected in price immediately. As with corn, we want to be optimistic on prices, but we have to trade the market we have, not the one we want. Unfortunately, the technical breakdown leaves the door open for a retest of the July 16th lows at 826 ¼. Previous support now becomes first resistance, we see that coming in from 878-883 ½. Get our full technical breakdown in tomorrow morning’s Grain Express.
Wheat: September wheat futures finished Friday’s session down 17 ¼ cents, putting prices in negative territory for the week by 12 ¼ cents. Futures traded in a 40 ½ cent range for the week. Funds were estimated buyers of 15,751 futures through August 7th, extending their net long position to 53,732 futures.
USDA Report Recap:
Production: 1.877 billion bushels, down from 1.881 in last month’s report
New Crop Carryout: 935 million bushels, down from 985 in last month’s report
Quick Take: Wheat futures couldn’t avoid spillover pressure from corn and beans following Friday’s USDA report. We continue to believe that there is more risk to the downside for prices. 538 ½ will be first support, if the bulls can defend this they will remain in control. However, a break and close below will likely spark a round of long liquidation. Get our full technical breakdown in tomorrow morning’s Grain Express.
Live Cattle: October live cattle finished Friday’s session up .075, narrowly trimming losses to the week to 2.75. For the week, futures traded in a 3.95 range. Friday’s Commitment of Traders report showed funds bought 3,691 futures, expanding their net long position to 55,152.
Quick Take: We were a little premature in suggesting to by Thursday’s pullback, but we still believe there is value in the market and would be willing to add at lower prices. There is a lot of technical support from 107.50-107.90, this pocket represents the 100-day moving average, a key retracement on the year, and trendline support from the May 17th, June 15th, and July 11th. On the resistance side of things, the bulls need to reclaim 109.55, this represents the 50% retracement (middle of the range) for the years trade.
Feeder Cattle: August feeder cattle finished Friday’s session up .625, trimming losses for the week to 2.85. For the week, futures traded in a range of 4.60. Friday’s Commitment of Traders report showed funds sold 1,080 futures through August 7th, shrinking their net long position to just 871.
Quick Take: We would have expected the pullback in grains provide more of a pop in prices Friday afternoon, but the reaction was relatively mute which we believe confirms our bias. We have been more pessimistic on feeder cattle as the chart is rounding out and becoming more bearish. In our Livestock Roundup reports last week we mentioned the “Head and Shoulders” formation forming, this is looked at as bearish. A break an close below 147.95-148.45 opens the door for a run at 145.50, this represents the 50% retracement (middle of the range) for the year. Only a close back above 153 will put the bulls back in the driver’s seat.
Lean Hogs: October lean hog futures finished Friday’s session down .20, shrinking gains for the week to just .15. For the week futures trade in a range of 6.25. Friday’s Commitment of Traders report showed funds sold 4,407 futures through August 7th, expanding their net short position to 12,040.
Quick Take: Futures saw a limit up day on Thursday with follow through early Friday, which was eventually erased. The chart remains bearish, there is no doubt about it, but we have been very clear in our Livestock Roundup reports that relief rallies are inevitable and a great way to get exposure with limited risk is buying call options. If the market can stabilize and the bulls can achieve consecutive closes above 52.50 this week that would neutralize the chart and could spark additional short covering.
If you have any questions or would like to discuss the markets in more depth, please do not hesitate to call or email.
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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.