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While it was fun to see the bean market reach into new recent highs last Friday, yesterday it was treated as a group of naughty children (not sure if that is acceptable terminology anymore) who were being punished for jumping over the fence into the crabby neighbor’s garden and getting caught. Back to the woodshed for a lashing. Thankfully, not all the children, i.e., corn and wheat, had ventured over the fence so did not receive the same treatment yesterday but then again, they never had the opportunity to taste any of the succulent fruits and vegetables on the other side either. Sometimes you just have to breakout of the security of existing boundaries to try and experience what good things may lay on the other side. Be that as it may, grain and soy markets are again contained within long-term trading ranges, and it would not appear that we are headed anywhere else soon.
One of the factors that could create a drag on sustained (commodity) strength may be the U.S. dollar. Granted, there has been a little increase in the volatility of trade recently with all the heated rhetoric with North Korea and the infighting in Washington, but when viewed from a weekly chart, it would appear that we are lining up for a corrective advance. I should point out that longer-term charts continue call for additional weakness down the road and the fact that we have violated the 2015/16 bottoms (wave 4) should have confirmed that a major top has been established, but that certainly does not mean we will not see corrective bounces. Note that the weekly indicators are quite oversold and on the cusp of turning higher and in the past when that has occurred, we often see at least 6-months or so of advance. While that does even if correct, that does not mean that commodities must track lower at the same time, but without a significant driving event, I suspect it spells more sideways stagnant trade for our sector.
Nothing out of the ordinary in the crop progress reports as we find corn harvest complete at 11% compared with 14% last year and 17% average. Beans harvest has reached 10% complete versus 9% last year and 12% on average. The current weather outlook for the middle of the country appears favorable for rapid progress this coming week.
I have to imagine we are instore for rather flat directionless trade now at least into the reports at the end of the week. The estimates released yesterday by Reuters have corn stocks at 2.353 billion, beans at 338 million and wheat at 2.205 billion.
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