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Grains: Buy 1, Sell 1, Hold 1

Published on: 14:15PM Nov 06, 2017

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CORN (December)

Last week’s close: December corn futures squeaked out a ¾ cent gain on the week, trading in a narrow 6 ¾ cent range as the market continues to consolidate within tighter technical levels ahead of this week’s USDA report.  Fridays commitment of trader’s report showed that funds increased their net short position by 28,369 futures and options contracts.  This puts their net short at 202,763 contracts which is a record short position for this time of year.

Fundamentals:  We probably sound like a broken record saying that the market is searching for a fundamental catalyst to give this market new direction.  This Thursdays USDA report which is due out at 11am cst could be that catalyst to put some volatility back in the market.  Yield estimates have been increasing over the past few months as the weather concerns early in the year have to been as worrisome as previously thought.  FC-Stone released their estimates last week and they are looking for a yield of 173.7 bushels per acre, this compares with their estimates of 169.2 bushels per acre last month and 162.8 bpa in August.  Informa Economics released and raised their estimates last week too, they are looking for a yield of 173.4 bushels per acre, up nearly three bushels from their previous estimate.  Their increased yield projections led to an increase in final production from 14.182 billion bushels to 14.41 billion bushels.

Technicals: Corn prices are continuing to resemble that of a stick in the mud, trading in a tight narrow range for two months straight.  The 50-day moving average has been a key level of resistance for us, this comes in at 351 ¼ this morning and is continuing to work lower.  If the bulls can achieve a close above this level it would be the first time since July and certainly a step in the right direction.  In order to encourage short covering from funds, we will need to see a break and close above 355 ¼ to mark higher highs for the second time since posting a low on October 12th.  On the support side of things, 345 ¼ is the first line in the sand.  This was a higher low that we put in last week, if it holds it would be the second higher low from the October 12th lows of 342 ½.  Tops and bottoms are a process not a point, these technical levels mentioned are important in attempting to form a sturdy base in the market. 

Bias: Neutral

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

Support: 342 ½-345 ¼**, 334-335 ½***

 

SOYBEANS (January)

Last week’s close:  January soybean futures saw a disappointing session on Friday where we saw all of the week’s gains given up, finishing a penny lower for the week; funds were estimated sellers of 9,000 contracts Friday.  Fridays commitment of trader’s report showed a net long position of 39,016 contracts, this is down roughly 8,000 contracts from the previous week.  Volatility did pick up slightly as the trading range was 18 ½ cents wide. 

Fundamentals: As harvest is nearly complete here in the states (looking for 90% complete in today’s progress report) attention will continue to turn and give more weight to South American weather as they continue to plant and go through their crop development stage.  However, before shifting all the focus, you will still want to keep a close eye on this week’s USDA report which will be released Thursday at 11am cst.  FC-Stone has come out with yield estimates at 47.7 bushels per acre.  We also so Informa Economics publish an estimate of 49.7, down slightly from 50 bushels per acre in the previous month.  We will continue to compile analyst estimates and provide a convenience table for you before and after the release of the report. 

Technicals: The market has been trading technically sound over the past two months, holding key support levels defined by the trendlines and moving averages we have been writing/talking about nearly every day.  Last week’s failure at technical resistance led to some profit taking which brought prices right back to trendline support and the 50% retracement from the June lows to the July highs.  We see technical support from 984 ¾ down to 979 ½.  Aside from important trendlines and Fibonacci retracements, we also have the 50,100, and 200 day moving average.  If the market does break and close below, we could see long liquidation from the funds but until then we will continue to have a bullish bias.

Bias: Bullish

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

Support: 984 ¾**,979 ½***, 968 ¼**, 957-963 ¼****

 

WHEAT (December)

Last week’s close:  December wheat futures were under a lot of pressure to start the week but short covering elevated prices to finish the week just a penny lower after trading in a 12 ¾ cent range.  Funds were estimated to have been sellers of 1,000 contracts on the week.  Fridays commitment of trader’s report shows the funds have a net short position of 110,875 futures and options contracts, this is an increase of 26,910; keep in mind that this data is compiled through Tuesday and does not reflect Thursdays short covering rally where funds were estimated to have been buyers of 7,000 contracts.

Fundamentals:  The wheat market has been looking for new fundamentals to get prices out of their downward slide.  Exports are something we have been continuing to keep a close eye on and that is likely what needs to change.  With ample global supply we will need to see an increase in export demand, something we have not been able to find over the past several weeks.  Export inspections will be out later this morning, we will have those figures in tomorrow’s report.  Crop progress is this afternoon at 3pm cst.  The most important event of the week will be Thursdays USDA report, we will have our estimates out in tomorrow’s report. 

Technicals: The market saw short covering on Thursday which has a lot of armature analysts/traders deciding to be a hero and saying a bottom is in.  Although it could be it is not confirmed, and we would rather step back in on the short side against technical resistance.  Technical resistance comes in at 438 ¼ this morning, this represents the 50-day moving average, as with corn this is an indicator we have not closed above since July.  The trend is your friend until the end when it bends, and we have been seeing lower highs and lower lows, there’s just no need to fight it just yet. 

Bias: Bearish

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

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

 

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