World Perspectives
feed-grains soy-oilseeds wheat

PM Post - Washout

THE OPEN

July beans:  20 lower

July meal:  6.20 lower

July soyoil:  64 lower

July corn:  17 lower

July wheat: 7 1/2 lower

The markets opened in line with trade expectations, but poor export sales and a negative reaction to the report yesterday set a deeper sell-off in motion.  Sell-stops were triggered in many of the markets as prices worked lower making today an exchange of ownership as funds sold into commercial scale-down pricing activity.  Oilshare traded higher as traders were back to buying soyoil/selling meal once again, though weaker crude and lower .  

In stories, the US Coast Guard announced on Wed. that it has closed the Mississippi River near Memphis, Tenn., due to a crack near the I-40 bridge.  The guard noted that 16 vessels were in line with 229 barges. 

SOY

  • The key feature in the soy complex was that of higher oilshare, with July trading up to 43.26% as meal losses accelerated vs. soyoil during the session.  Fundamentals have not changed for soyoil, which continued to hold up well vs. other markets during the session.  July crush trades to 76.38c/bu.  As the morning progressed and more sell-stops were triggered, funds began to accelerate sales.   
  • July bean prices found accelerated selling once prices broke through $16.00, key support, sending prices down to triple lows of $15.75 which offered a bounce.  November beans tested $14.00 with a break to $13.65 which is really where the initial rally started from.  This could be a value level moving forward, and if needing to price would do so.  
  • July meal prices traded through $435.00 and into sell-stops as well as good commercial scale-down pricing orders.  July soyoil values notably held against key support at 65c, and traded back over 66c showing its technical strength.  
  • At midday, would note that July soyoil prices continue to exhibit strength and a tendency to now want to stay under 66c, which could be a clue to further strength to come.  July /Nov bean inverse trades back to 1.90c from highs in the PM session at 2.08c, but bounces back over 2.00c at midday.  This has now become an extremely technical trade which has broken away from the fundamental path, though poor export sales weigh on the market as liquidation takes place.  
  • Still, outstanding old crop bean sales on the books stands at 4.765 mmt with China taking 761 kmt and unknown for 1.628 mmt.  Combined sales plus shipments are now 61.379 mmt or 2.555 bln bu which represents 99% of the 2.280 bln bu projected export program for the marketing year vs. the 5-year average pace of 95%.

GRAINS

  • Corn prices suffered the most losses today but was to be expected as funds remain the longest in this market.  The export sales announcement did not excite the funds, who appeared ready to sell any strength that emerged in order to lighten up heading into what could be a nice planting window for the weekend.  Sell-stops were triggered as charts formed new resistance on both July and December contracts.  The sell-off was enough to drive Dec. corn through trendline support at $5.65 towards $5.50, where the last rally started from. July corn sold off to its major lower support lows of $6.80 and then down to major support at $6.75.
  • The Jly/Dec corn inverse traded down to 1.11 1/4c c from overnight highs of 1.23c.   Both markets had buyers who were taking advantage of chart weakness to get something priced. 
  • July wheat fell in line with the other markets trading down to recent multiple lows before triggering sell-stops of its own and a trade below $7.00.  KC wheat drops down to $6.51 from values that were over $7.00. 
  • For corn export sales, China and unknown cancelled 334 kmt and 193 kmt of old crop corn, respectively.  New crop sales to China were 1.360 mmt, unknown 254 kmt and Mexico 220 kmt.  At midday, prices are beginning to show some life after steep losses, and if needing to price this seems to be a golden opportunity.

AT 12:00 THE MARKETS ARE AS FOLLOWS:

                                                        HI                         LO

July beans: 51 lower                 16.45 1/4              15.75

July meal:  24.10 lower              450.30                   422.00

July soyoil: 42 lower                    66.86                     65.08

July corn:  38 lower                    7.14                       6.74 3/4

July wheat:  31 lower                 7.34 1/4                  6.90 3/4

July canola:  45.00 lower           885.50                    857.30

OUTSIDE MARKETS

Stocks are trading 70 pts higher in the early going but are up 370 pts at midday.   Crude oil prices are trading down to $63.91/barrel and the US dollar at 90.58. 

CLOSING COMMENTS

Today's wash-out took prices back to the lowest end of trading ranges that should hold, particularly for beans.  July beans met and held at the starting point of the last rally at $15.75, and if tested again and holds should be a good purchase.  Nov. beans at $13.65 was where the last rally started from to eventually target ctr highs.  July corn at $6.75, though tested today, should get the attention of China who has been purchasing deep breaks up to now.  And Dec. corn at $5.55 should prove to be value as well.   This break will allow users to play catch up, and if short would look to get something covered.  Could also try the long side of the market from here, as the break today seems to have been overdone.  

As a reminder all is not ideal in the US, and this was probably a badly needed correction which could make way for a retracement rally.  If by chance the market settles under the levels above, would have to say that a top could be in place.  Suspect that settling under the lows today may not be in the cards, as that would imply something else is going on that we just don't know about.  Would opine that one should price, cover a short, or try the long side with very tight sell-stops.

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