GOOD MORNING,
Prices continue to work into trading range territory, with current precipitation taking us down towards trading range lows encouraged by the thinking that Monday's crop ratings are only going to improve. Having been so low in terms of condition ratings, perhaps there is nowhere to go but up from here. A reversal would require a persistent stretch of hot and dry weather over an extended period of time.
With charts turning sideways, those in need of pricing have turned more patient. Yesterday, the amount of commercial buying activity in corn and meal was not as dense as in previous sessions, which allowed the fund selling to take both markets into deeper losses than expected.
This morning's activity, however, is about short-covering and new interest in buying the market at these lower trading range levels. Funds yesterday sold another 5000 contracts of corn, bringing them likely to a 150K futures / options long position. Funds are now short an estimated 50K beans, slightly short meal (estimated 20K), and even shorter soyoil (estimated 30K).
BUSINESS
Without an extended weather problem, the market will adjust and focus again on demand, which for now is low end for both corn as stiff competition from Argentina and Brazil (in the process of harvesting its Safrinha crop) takes place. After the close, Egypt announced they were in for wheat for August 21-31 shipment. Last offers went the route of Russia/Romania, and if the US is to compete, futures may have to break the $5.00 level. The lowest offer for now is from Romania and the Ukraine. Interesting that Russian offers are at higher prices.
WEATHER
Short-term forecasts are hot and steamy, but not completely dry, with a trend for cooling temperatures next week. Episodes of rainfall continue into the weekend where a hot and dry pattern sets up. Temperatures are going to be some of the hottest on tap for the summer this week, with an expected cool-down next week.
STORIES
China / US appear to remain far apart on trade, with President Trump saying Tuesday that China was supposed to be buying ag goods. Trump suggested that there is a long road to travel, and if progress is not achieved, he could put tariffs on an additional $325 billion of Chinese goods.
Brazil and India are expected to sign a memorandum of understanding on production and trade of ethanol. Brazil is a large producer and India a heavy consumer of ethanol.
Prices started the evening lower, but have found some light buying activity for a possible turn-around Wednesday:
beans: 4-6 higher
meal: 1.20 -1.50 higher
soyoil: 15-20 higher
corn: 3-5 higher
wheat: 3-5 higher
What to look for today? Markets were lower in the evening with good recovery for the last hour of trade, settling at the highest end of trading ranges. Would therefore expect a strong open with an extension rally.
The average Ohio basis was lower yesterday for the first time in over a month.
Outside markets feature firmer crude oil, trading up to $58.22/barrel, and a slightly weaker US dollar at 97.30.
TECH TALK:
All of the charts are still in current trading ranges, but as we continue to test the highs and lows, it will lead to a break-out as defined tops and bottoms become more clear.
- Dec corn recovers from key support which is $4.26/$4.30, and the bounce is price friendly as bear markets do not feature the ability to do so. Look to return to the mid-point level of $4.50-$4.55.
- Sep wheat probably becomes a follower with the ability to hold $5.00. If short, would probably be covering something from $5.05-$5.10 as we are in a trading range with little follow-through at the market lows.
- Nov beans posted double lows at $9.02 ½, which is slightly higher than the last larger break to $8.99-$9.00. Recovery today over the 100-day moving average of $9.11 is impressive technical action that suggests we pivot back up to $9.25.
- Dec meal holds key support at $313.80, meaning we could target resistance again at $318.00.
- Dec soyoil futures bounce off 2840c, and the price pattern now suggests a run back towards 29c. The bounce higher today continues the trading range pattern, despite recent weakness.
NOVEMBER BEANS: Continuing to trend sideways but with a slightly higher stance as pullbacks are shallower. In order to turn lower, the market would have to break the lower blue support line which crosses today at the 38% level on a Fibonacci retracement at $8.95. Double lows at $9.02 1/2 is key support as we begin the morning, and the market is once again above the 100-day moving average located at $9.11. In doing a Fibonacci retracement from the contract low of $8.12 up to recent highs at $9.48 we get the following:
38% - $8.95 (tested successfully with trade back over - - the red line marks the 38% level)
50% - $8.85
62% - $8.65
In the big picture. the chart suggests playing the trading range from $8.90-$9.50 until we break and settle under the lower blue $8.85, which would turn price action lower.
TAGS – Feed Grains, Wheat, Soy & Oilseeds, North America
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