Commodity Market News

Summary

US futures market regulators are going to stop collecting data on the flow of money from index funds into commodity markets, retreating from a practice they began a decade ago when those funds were blamed for soaring prices. In a speech Wednesday, Commodity Futures Trading Commission Chairman Timothy Massad said the agency would stop surveying banks and traders for its monthly Index Investment Data report, which tracks the amount of money following commodity indexes such as the S&P GSCI and the Bloomberg Commodity Index. Commodities markets have deflated dramatically since the implementation of the practice. Meanwhile, the agency’s priorities have shifted amid limited resources as it takes on more oversight responsibility for the vast derivatives markets beyond commodities. Some believe that mounting legal challenges is the reason for the about face.

Corn

The Corn harvest is now 85% complete. Brazil set a new record last month when it was reported that they sold 5.55 million metric tons of Corn in October. The previous record was set in October 2013 when they exported 3.95 MMT. According to trade analysts we could be looking at another record in November if there are no rain delays. Bloomberg is estimating that the Chinese crop will fall 5.8% from last year. If that were to occur that would be the largest year to year loss in 15 years.

Soybeans

The soybean harvest is now 92% complete. The prices are in the middle of the traditional quiet period that should run through the end of November. The Soybean planting in Brazil is about 38% complete. The El Nino conditions seem to have provided much needed rain across the largest Soy producing region of Mato Grasso but truckers in Brazil have intentions of going on strike this week. This potential strike does not look to have a major impact on the markets. Weekly export sales came in sharply lower than trade estimates at 656K tons versus the 1.2 to 1.8 million tons that were estimated. Fund managers viewed this as increased weakness leading to an increase of net short positions.

Wheat

Wheat is taking a bit of a hit in early morning trading. Reports are out that Iran plans to export Wheat for the 1st time in a decade. They are on record as stating that they are looking to sell 300k tons of Durum Wheat within the next few months. Wheat export sales were a mere 85k tons (the 2nd lowest figure of the year). With European stockpile looking to climb to the largest in seven years, US Wheat prices could be in trouble.

Crude Oil

OPEC Oil Production remains strong and Russia has vaulted into being the largest oil producer in the world putting out 10.78 million barrels per day. The Baker Hughes rig counts posted its 10th week of declines dropping to 572. The low prices and over production is making it very tough on oil rigs.

Iran plans to export Wheat for the 1st time in a decade

December 2015 Corn

December 2015 Corn broke and closed below our trend line and fired off a sell signal. Producers that have been holding on for a move to $4.00 should consider a risk management protocol to hedge against a market that could go south. In mid-day trading the December nearby Corn has breach the 370 level. The next potential support level rests at 360 but below 360 we could see a big time selling as there are probably a large number of stops situated at the 360 level. Last week we stated that we were looking for move to the 370 to 372 range. The 370 price level was hit on Friday. We have long been saying that a move to 400 was not very probable and it is even more out of reach right now.

Producers that have been holding on for a move to $4.00 should consider a risk management protocol to hedge against a market that could go south.

March 2016 Corn

Similar to the December Corn contract, March 2016 Corn signaled a short opportunity in the middle of the week. Below is a view of the entry, stop and target levels that we suggested during the week. We are seeing some heavy selling ahead of the WASDE report that is scheduled for tomorrow. This contract has been under pressure for the past few trading days and we could see continued selling past the report tomorrow into our cycle turn date of November 12th. A close below support at 378.50 could send prices to the 370 area. Once again the timeline of November 11-14 is a potential timing event for a pivot on this contract.

January 2016 Soybean

The wave 4 consolidation that has kept Jan Beans in check since the August 24th and September 11th lows might be finally on its way to completing a wave 5 low. In the chart below we have projected a minimum price target of 850 this contract. It got close on Friday when it reached 858 and it is having trouble holding onto gains made in early morning trading. The WASDE report tomorrow could make or break this contract so we will be listening closely to what this report has to offer. A three day bounce from the Friday low that fails at the 880 level or below would be a very bearish sign.

December 2015 Wheat

December Wheat appears to have failed at our strong resistance price band of 525.50-528.50. As anticipated it continues to have quite a bit of trouble here and is forming a triple top. It is important to note that if a 4th attempt is made at this level prior to breaching the 483.25 low we would be looking for higher prices to follow. Producers had all of last week to take advantage of prices holding near resistance. Hopefully are warning of prices being near resistance worked in your favor. Already in intraday trading prices are down 15 cents and it is looking like we will have a weak close today.

December 2015 Crude Oil

In today’s chart we have embedded a last week’s projected price action against the current market price action. The Baker Hughes rig report continues to show that rigs are struggling in this environment. The stochastic is positioned to the downside with 43.60 sitting as the next key level for this contract. Crude moved up into a ‘B’ leg a possible larger A-B-C pattern. We could see a major bottom in the area of 36 to 35.