Grain Market Overview August 10
August 10, 2016Grain Market Overview August 17
August 17, 2016Commodity Market News August 15
Summary
So much for that bearish USDA WASDE report that was released on Friday. After releasing figures that showed estimates reflecting the largest US Corn crop and 3rd largest Soybean Crop, instead of trading under pressure Corn and Beans have instead shown resilience at support and continues to garner strength in early trading today. The potential for a pause or change in trend triggering in the first week of August as we projected seems to be coming to fruition. Even after a big push to the downside in the onset of the report's release on Friday, futures prices were able to bounce back as the day progressed. The strength of the reports was largely not much of a surprise to trades. The way in which the markets rebounded off of their lows was analogous to traders and smart money taking the opportunity to take profits by way of covering short positions as well as end users locking in some great pricing. For some time we have been suggesting that the bad news may be fully discounted in the price of Corn futures and that is looking more and more to be the case.
The WASDE report forecast for Corn ending stocks was at 2.409 Billion bushels. That was 0.703 Billion bushels up from the 1.706 Billion bushels from last month. The Corn production estimate was forecasted at 15.153 Billion bushels versus the 14.540 Billion bushels from last month. For the first time this season, crop conditions declined with the good/excellent ratings falling from 76% to 74%. Pre-report trade estimates for Corn yield was 167 to 175 bpa, the WASDE report came in at 175.10 which translates into a 15 Billion bushel crop which like Beans would be a record yield.
The international environment is lending its hand in price support for the short term. Brazil's CONAB lowered its Corn crop estimates from 69.1 million tons to 68.5 million tons. Several regions in Brazil are experiencing shortfalls in Corn production. The shortfalls have prompted the South American nation to move forward with plans to allow GMO Corn from the US to be imported. Reports indicate that as much as one and a half million tons of Corn could be imported over the next few months. While we are on the subject of Brazil, the nation's Senate moved forward in an approval vote to start an impeachment trial for their suspended President. The news was well received by Brazil's economic front. Their currency (the Real) closed at levels last seen a year ago.
Soybean futures recovered well off of its lows on Friday and is following through with strength today accompanied with strong volume. The combination of technical support, recent demand and seasonal time cycles have come together in aiding Bean futures in its recent price stability. The crop ratings held steady in the category of good to excellent remaining unchanged at 72%. The real surprise was the strength of the yield estimates. Trade estimates were looking for a range of 46.7 to 48.8 bpa but the USDA blew away the estimates at 48.9 bpa. If this estimate holds we are looking at the US producing 4 Billion bushels of Soybeans for the 1st time in history. The Soybean production was raised from 3.88 Billion bushels to 4.06 BB. The ending stocks were raised from 255 Million bushels to 330 Million bushels. These estimates are so massive that the trade was starting to question the size of the projections by the end of Friday.
Wheat has been devoid of any newsworthy events or information that could propel it from the range bound sideways consolidation that has trapped its movements for the past 4 weeks between 425 and 460. Both the World and the US ending stocks were right in line with trade estimates and the report was neither bullish nor bearish. Wheat crop in the Black Sea region continues to grow. The Russian agricultural consultant group, IKAR raised Russian Wheat crop estimates 1 million tons to 70 million.
Corn
September Corn finished the week only down 2 cents on Friday and the December contract was only off 1.25. Even after the bearish report on Friday it is operation as if the bad news if pretty much fully discounted in the price already. Our seasonal cycles are calling for Corn to turn sideways or up for the balance of the month. The December contract could reach as high as 375. Managed Money increased their net-short Corn position by about a third according to the most recent COT report. Speculators increased their net short contracts from 106,768 to 141.495 contracts.
September 2016 Corn Charts
This contract briefly broke support at 318 but bounced back after hitting our natural support level just below it. By the end of Friday price was well above the 318 level that we believe would confirm near term strength for this contract. Right now we have overhead resistance at 336 then at 345.25. If price closes above 336 this week than look for a minimum price objective of 345.25 for this contract over the next 2-3 weeks.
Two levels below the point of control has shifted down to 333.25 from 338 last week. We like the 336 as a level of importance for this week and it is very close to the 333 level. Expect 333-336 to be strong resistance this week. The time cycle calling for a low to occur in the first week of August is looking really good on this chart. The strong reversal bar on Friday was impressive and the follow through volume today was also quite impressive. September 2nd is looking like the next important date for Corn.
December 2016 Corn Charts
The downside level of importance for the December contract at 329 last week was a thing of beauty. Upside resistance at 347.50 is now a minimum price target for this contract by the end of the month. Above 350 this contract could eventually make a run to 366.50 but that might be a challenge. Our projection price would lift off is looking good. Notice on the chart that rectangular blue region on the chart starts near the end of the month. If price moves up into this region look for a potential change in trend when it enter the region.
Two (2) standard deviations below the point of control is at 331 this week. The green horizontal line (geometric support/resistance level) pegged the low of the week. The next two levels of importance on this chart are 342 and 353. Our time cycle low in the range of August 9-10 was about two days early with the low hitting on August 12th.
Soybeans
September Beans were up 11 cents last week and November Beans emerged with a 7.25 cents gain of its own. Following Managed Money's lead maintaining their large net long position is working out for them for now. Beans are still considered to be in a weaker position in a longer term perspective but short term a run to resistance is completely in line with normal market movement. Weather can still create problems over the course of the next 2 weeks or but if that does not happen we are for Beans to fall through the first or second week of October. Rallies that reach key resistance levels along the way develop into potential shorting opportunities.
September 2016 Soybean Charts
Once again, the September Beans found great support at our 'Make or Break' target region (the green area in the chart below). The low of the week was pretty much right at the 360 degree price level of 979. We suggested last week that 979 could serve as the terminal price level for the cycle low and to expect a contract reaction at that level. That is exactly what we experienced and we are looking for higher prices with key resistance overhead at 1029 and at 1042.50.
We did not get the close above 1023 last week but price is still looking like it wants to reach 1056.50. Last week our concern was low volume but now that the WASDE report has been released, volume has returned and short term at least we are seeing price find strength at technical support. One standard deviation above the point of control is 1051 so this will be the first real test for this contract if it is able to keep rising.
November 2016 Soybean Charts
November Beans held support inside of our 'Make or Break' region all of last week. We shared that we had key support at the 270 degree mark of 958.75 and that was pretty much last weeks low. Price closed above the 360 level for the 1st time in about two weeks and that is of significance. As long as we can stay above all of this week look for a minimum move to 1053.75.
Wheat
September Wheat posted a 2nd consecutive weekly gain adding 6.25 cents to its coffers. It made a move to test support at 405 on Friday but recovered quite well and although it was off a bit in trading today it still continues to hold support. First notice is about two weeks away and net week we will turn our attention to the December contract. We have a potential overhead target 436 or even 440 for this contract so the way in which it plays out over the next few days will be very important. Like Corn the decline in Wheat may turn out to be fully discounted already.
Grain Market Overview October 11
Read more