Will the grain rally last?

Published on: 13:21PM Nov 02, 2018

Corn (December)

 

Yesterday’s Close:  December corn futures finished yesterday’s session up 2 ¾ cents, trading in a range of 8 cents. 

 

Fundametnals:  The market caught a bid on two positive developments.  The softening U.S. dollar has put some wind in the sails for corn and could continue to do so if it continues to retreat.  The bigger catalyst was a tweet from President Trump suggesting that the U.S. and China were making some progress.  This was a shot of adrenaline that started wearing off in the afternoon session.  The tweet provides “hope” but the dollar is more meaningful to us at the moment.  Export sales yesterday morning came in at 394,400 metric tons for 2018/2019 and 5,000 metric tons for 20019/2020, nothing to write home about. 

 

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Soybeans (January)

 

Yesterday’s Close:  January soybeans finished yesterday’s session up 28 ¾ cents, trading in a range of 42 ¾ cents.

 

Fundamentals:  Poor exports put a damper on the morning, but that quickly changed after a tweet from President Trump suggested the U.S. and China were moving in the right direction with trade talks.  The market popped instantly.  In our view, this was more short covering than renewed bullishness from buyers.  The bearish news has been priced in and funds are looking for new opportunities, there are only so many “harvest pressure” headlines the market can take.  If it were any other time of the year that would have likely been a 15-20 minute pop and drop in our minds.  What did you expect Trump to say a week ahead of elections? That the U.S. and China were nowhere close?  On top of that, it was reported weeks ago that the U.S. and China would talk at the G20 summit; FYI, that’s what world leaders do at world summits.  The softening U.S. dollar also helped add an extra spark.  In yesterday morning’s report we mentioned that there “may be opportunity to the buy side in the very near term.”, if you were long, don’t be greedy and take your profits or at least reduce risk.  We think the market will start settling into a new trading range, see the full technical breakdown below. 

 

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Wheat (December)

 

Yesterday’s Close:  December wheat futures finished yesterday’s session 5 ¼ cents, trading in a range of 9 ½ cents.

 

Fundamentals:  Wheat was able to benefit from spillover moment in corn and beans but the bigger longer-term catalyst were also supportive, that is decent exports and a softer U.S. dollar.  Wheat exports have been picking up and is now a trend in our mind, meaning there may be an opportunity for this market to work higher (especially if the dollar continues to soften up).  Export sales yesterday morning came in at 582,500 metric tons for 2018/2019, a fairly friendly number for the wheat market. 

 

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