Weekend Update (Grain & Livestock)
Jul 15, 2018
We were on Bloomberg Friday, discussing the future of soybeans
December corn futures finished Friday’s session down 4 ¾ cents, expanding the losses for the week to 18 ½ cents. Friday’s Commitment of Traders report showed that funds sold 33,584 futures from July 3rd-July 10th, expanding their net short position to 140,944. Despite the rapid decline, there is plenty of room still for funds to add to that short position.
Quick Take: The two-month free fall in price has left many market participants feeling bruised and battered. We like the prospect of higher prices at these levels but are aware that there is more downside potential. We would rather wait to see a bottom form and buy on strength.
November soybean futures finished Friday’s session down 15 ½ cents, extending losses to 59 ¾ cents for the week. Friday’s Commitment of Traders report showed that funds bought 709 contracts from July 3rd-July 10th, trimming their net short position to 63,453. Without a doubt that short position is larger in real time. As with corn, this is not an overly aggressive short position for funds.
Quick Take: The old saying “The market can remain irrational longer than you can remain solvent” has never seemed truer. The market has fallen nearly 25%, partially negating the imposed Chinese tariffs. We were on Bloomberg Friday morning discussing the idea that demand will not evaporate but shift now that US beans are at a steep discount to South American beans. Click this link to watch now! The market has failed to achieve two consecutive closes in positive territory for roughly 2 months now. Funds still have more powder to sell which keeps us cautious here. In the longer run, we see tremendous value here.
September wheat futures finished Friday’s session up 13 ¼ cents, cutting the losses to 16 ¾ cents for the week. Friday’s Commitment of Traders report showed that funds sold a whopping 15 contracts from July 3rd-July 10th, narrowly increasing their net short position to 1,266.
Quick Take: We continue to remain bearish on the wheat market until the bulls can achieve consecutive closes above technical resistance (see Grain Express tomorrow morning). We would not be surprised to see the market near contract lows in the near futures.
August live cattle finished Friday’s session down .10, extending the losses for the week to 1.625. Friday’s Commitment of Traders report showed funds bought 1,843 contracts from July 3rd-July 10th, expanding their net long position to 33,177.
Quick Take: We have been very outspoken about our belief that the market is range bound, that has proven to be the case over the last two months. The range is shifting higher with the market posting higher lows and higher highs, so for longer term traders the bulls have an advantage.
August feeder cattle futures finished Friday’s session up .025, finishing t he week down 1.425. Friday’s commitment of Traders report showed funds bought 837 contracts, putting their net long position at 1,988.
Quick Take: Last week was the first negative week in two months as the chart continues to look friendly with a retest to the highs near 156 in the cards. Technical support comes in near 148, this area represents trend line support from the May lows, the 200-day moving average, and a key retracement on the year.
August lean hog futures finished Friday’s session down .10, a small dent on the 5.325 loss for the week. Friday’s Commitment of Traders report showed funds sold 7,053, flipping them to net short 6,980.
Quick Take: We made it clear in our daily Livestock Roundup that the choppy trade is keeping us on the sidelines. The choppy trade turned hard last week which may present some opportunities in the coming week. The inability to hold a relief rally Friday is a caution flag.
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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