Are grains forming a bottom?
Jul 10, 2018
Yesterday’s Close: December corn futures finished yesterday’s session down 5 cents, trading in a range of 8 ¾ cents. Funds were sellers of an estimated 17,500 contracts.
Fundamentals: Spill over pressure from soybeans was unavoidable to start the week as favorable weather conditions led to a buyer strike. The weekly Crop Progress report showed that good/excellent ratings fell 1% to 75%. 37% of the crop is silking, well ahead of the 5-year average of 18%. The Commitment of Traders report released yesterday showed funds sold 16,632 futures through July 3rd, expanding their net short position to 107,396 futures. Thursday’s USDA report will draw attention, but we feel will have little impact on short term pricing. Early estimates for yields are 174.9 bushels/acre. Weather will arguably be the key catalyst over the next month, if key areas in the corn belt start to dry up we could see a premium come back into the market.
Technicals: The market is in the middle of “no mans land” as prices consolidate and await new news to hit the wires. 377 ¼-380 ½ is the resistance pocket the bulls need to reclaim on a closing basis in an effort to encourage additional short covering. The next significant resistance pocket above that isn’t until 395 ½-401 ¾, this is a wider pocket than we would typically want but it holds a lot of significance. This pocket represents the 50,100, and 200 day moving average, along with a key retracement on the year, previously important price points, and the psychologically significant $4.00 handle. On the support side of things, 358-360 is a pocket the bulls bust defend on a closing basis. With prices at the bottom end of the range, we like the risk/reward to the buy side with risk set below the lows.
Resistance: 376 ¼-379 ¼***, 384-387 ¾**, 395 ¾-402****
Support: 358-360****, 345 ½-350***
Yesterday’s Close: November soybeans finished yesterday’s session down 22 ¼ cents, trading in a range of 30 ½ cents. Funds were estimated sellers of 11,000 contracts.
Fundamentals: Soybeans could not get anything going in Monday’s session as good weather and profit taking from Friday pressed prices back towards the recent lows. Yesterday’s Crop Progress report showed good/excellent ratings were unchanged from last week at 71%, most analysts were looking for a decline of 1%. The Commitment of Traders report released yesterday showed managed money sold 11,506 contracts through July 3rd, expanding their net short position to 64,162 futures. Thursday’s USDA report is not expected to hold a lot of market moving gems but could get the market moving in this current environment. Early estimates for yields are 48.6 bushels/acre. One interesting tidbit that surprisingly hasn’t been talked a lot about is that China will reimburse the buyer for the cost of the 25% tariff on soybean imports from the U.S. if they are for state reserves.
Technicals: We were expecting to see buying come in on the floor open yesterday and couldn’t have been more wrong. It was a true buyers strike as buyers from Friday paired back exposure and new buyers sat on their hands. The move below 879 was a caution flag, that will be first resistance today. On the support side of things 860-864 ½ is the first pocket, this represents previous lows and the breakout point from Friday. A move below here will likely send the market to test contract lows at 853 ¼. Despite the weakness, we like the risk/reward down here and are sticking with a bearish tilt in our bias.
Resistance: 879-882 ½**, 897 ¾-901 ¾***, 921 ¾-923 ½****
Support: 860-864 ½***, 853 ¼****, 844 ¼**, 825****
Yesterday’s Close: September futures finished the day down 5 ¾ cents, trading in a range of 10 ½ cents. Funds were estimated sellers of 4,000 contracts.
Fundamentals: Wheat worked lower to start the week as spillover pressure in the broader grain complex was hard to avoid. Yesterday’s Crop Progress report showed good/excellent ratings for spring wheat increased 3% to 80%, most analysts were looking for a decline of 1%. Winter wheat harvest is now 63% complete, just shy of what analysts were looking for. Thursday’s USDA report is expected to show all wheat production near 1.858 billion bushels.
Technicals: The market failed against technical resistance yet again which has led prices back towards the 200-day moving average in the early morning trade. Support below here comes in from 490 ¾-493, this represents the gap from July 3rd. A break and close below here opens the door to 475 ¾-480. Until the bulls achieve a close above our 4-star resistance pocket, we believe the bears are in control.
Resistance: 513 ½-516 ¼****, 522 ¼-524 ½***, 542**
Support: 490 ¾-493***, 475 ¾-480***, 450 ½-454 ¾****
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