GOOD MORNING,

The overnight markets were in correction mode for the PM session, led by wheat as better weekend rains were noted.  The markets closed mixed, and spreads are firming again.   The markets remain in technically driven mode and still have the fundamentals to back a bull market move.  Surprisingly, funds actually lightened up last week and may be waiting for a larger break post May 12 USDA report to add back length.  Strategy is everything.  

Good crush margins, overall demand and higher vegoil prices keep values on the up and up.  Over the weekend Egypt tendered for 30,000 mt of soyoil and 10,000 mt of sunoil for July arrival.  Spreads were lower last week but should see some adjustments this week and are already higher this morning.   Chatter continues to find estimates for the Brazil corn crop lower, but how low the USDA is willing to go is the question.  Nonetheless, there is simply less competition for US corn in the fall given what is happening now in Brazil.   

The most bearish item:  there is simply the need for charts to back and fill and congest gains on overbought extremes.  We rarely see values head higher without a correction.  If funds were sellers last week, look for more of the same Mon/Tues.

Wheat remains the most bearish wild card, as US values are well above other markets.   Wheat cannot afford to weaken too much in its relationship to corn.  

WEATHER

--US weather remains dry in the PNW.  It is also drier in western HRW areas with normal rains in SRW though rains over the weekend helped in some of the drier wheat areas.  Temperatures in the Midwest remain much below average.  

--Argentina's weather is dry allowing for harvest to continue.  EU weather is starting to improve with new rains, while Russia and parts of the eastern EU are too wet. 

REPORTS

Commitment-of-Traders report futures / options combined disaggregated as of May 4.

beans: net long 174,799

meal:  net long 54,150

soyoil:  net long 87,505

corn:  net long 372,548

wheat: net long 10,723

The Commitment-of-Traders report was a surprise as the funds were not as long as expected, actually net sellers last week.   Will they turn net sellers again into Wed reports in the hope that a larger correction will offer up the chance to own something at cheaper values?

ANNOUNCEMENTS

China's 2021 corn production is forecast to rise 4.3% from the prev. year to 272 mmt, as announced by a gov. think-tank, in its first official estimate by an agency.   Corn acreages for 2021 are expected to increase 3. 3% from the prev. year.

China's live hog futures fell nearly 7% today, the largest decline since the contract launched in Jan, as physical prices weakened further.   Hog prices have fallen sharply since late April and hit 20.29 yuan/kg, the lowest level since August 2019, as large volumes of heavy pigs continue to slaughter.  

DELIVERIES 

beans:  14     Bungs stopped 13

meal:  2  EDF Man stopped 2

KC wheat:  7

CALLS

Calls are as follows:

beans:  1-2 higher

meal:  .30-.80 higher

soyoil:  mixed

corn:  2-3 lower

wheat:  13-15 lower

OUTSIDE MARKETS

Crude oil trading up to $65.75/barrel, and the US dollar down to 90.10.  The Dow is 122 pts higher.

TECH TALK

• July beans offer up a shallow pullback from contract highs placed last week at $15.99 1/2.   Trendline resistance is close at $16.00/$16.05, and the path of least resistance remains higher with $15.60 now good lower support.  Prices dropped down to $15.75 overnight, but the pullback is fairly shallow given the whole move, and prices traded higher from lower signaling that another test of $15.99 is now more likely as weaker markets do not have the ability to bounce back from losses.   
• July meal is now in a wide uptrend channel with an overall trading range from $420.00 to possible highs of $450.00.  The high from last week is $443.40, and we are not very far away from this point.  The lower end of the trading range moves up to $420.00 from $415.00, and with the direction sideways to higher expect pullbacks towards $425.00 to be pricing/buying opportunities.  
• July soyoil prices back and test key support at 63c.  This is into key uptrend line support, so holding above 63c is key to higher trade.  So far prices have bounced off the 63c level nicely, and could own the market against 63c, with a tight sell-stop for a 63c-66c trading range.  
• July corn prices back away from contract highs of $7.35 1/4 but the pullback is shallow.   Visually, $7.21 looks like a pullback low from which the market could rally further, with trendline resistance close by at $7.40.    Dec corn contract high is $6.38, and the market returned to test $6.21 overnight.  The chart does not appear to be finished on the upside despite the pullback, and the lower part of the trading range now moves up to $6.05/$6.08.  The RSI is overbought at 80% but would look for any drop towards $6.15/$6.18 as a pricing or buying opportunity for a target high of $6.50.  
• July wheat chart now posts double highs at $7.69 to $7.67, with prices turning lower and back into the middle of the $7.15-$1.70 trading range.  At this point, this chart is giving up more of its gains having never broken out to the upside to score new c tr highs.  July Chicago remains the market most likely to fail if prices head lower, with price action never showing the inherent strength of the other bull markets like corn or soyoil. 

NOVEMBER BEANS

The bull market continues as new contract highs were posted last week at $14.43 1/4.  The trading range low at the very bottom is $13.60 but must consider it has moved up to $13.80 on a pullback of size.  The uptrend is getting stronger with an ADX of 42, meaning buyers will be there on pullbacks.  Look for a likely $13.90 / 14.00 to $14.50 trading range to form.  The RSI is overbought at 74%, (anything over 70% is overbought), and therefore would look for prices to find the best support at $13.85, but stronger bull markets do not let you get all the way back.  Trendline resistance for the day is $14.55 on another rally of size.  Think we are likely to go there.

TAGS – Feed Grains, Soy & Oilseeds, Wheat, North America