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Grains: Attention Turns to South America


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Grain Express

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CORN (March)

Yesterdays Close: March corn futures traded in a 4-cent range to start the week, closing the session down 2 cents. Funds were estimated to have been sellers of 13,000 contracts.

Fundamentals: Export inspections yesterday morning came in at 639,000 metric tons, this was close to the middle of the expected range from 550,000-750,000 metric tons; last week we saw 660,000 metric tons. South American weather will be one of the big catalysts for price as we look to round out the year. Dry weather over the intermediate term is starting to cause some concern for late planted corn. Fund positioning has been another big talking point over the past month and will continue to be until they reduce their position. Yesterdays Commitment of Traders report showed funds holding a short position of 210,466 contracts, a reduction from the previous report but still the third largest short position ever. Weekly crop progress for those of you still keeping track was released yesterday. Corn is 95% harvested, this is 3% behind last years pace.

Technicals: Prices have given back gains over the last two sessions with that momentum spilling into the early morning session. The RSI (relative strength index) is drifting lower with a read of 36 this morning; typically, a reading below 30 represents first signs of exhaustion on the sell side. 348 is the line in the sand we referenced yesterday on RFD-TV as key technical support, if the market breaks below we could see the market take another leg lower. The next support pocket comes in from 334-335 . On the resistance side of things, the market has a lot of work to do. 354 is the first line in the sand, but bulls will want to see consecutive closes above 361 to encourage short covering from funds.

Bias: Bearish

Resistance: 354**, 361****, 367-369 **, 373 -375****

Support: 348 **, 334-335 ***, 323-325 **

SOYBEANS (January)

Yesterdays Close: January soybeans traded in an 11-cent range yesterday, finishing the session up 2 cents. Funds were estimated to have been buyers of 4,000 contracts.

Fundamentals: Export inspections yesterday came in at 1,579,000 metric tons, this was on the low end of the expected range from 1,500,000-1,800,000 metric tons; last weeks was 2,276,000 metric tons. As with corn, we will continue to keep a close eye on developments in South America. Argentina is now estimated to be 41% planted, this lags their average pace. Brazils planting is estimated to be 84% complete, up 11% from the previous week; this is a point above last year and 5 above the five-year average. If we see weather concerns arise in either Argentina or Brazil arise, we could see a premium come into the market. Yesterdays Commitment of Traders report showed that funds had reduced their net long position by 2,406 contracts, putting their net position at a modest 20,144.

Technicals: The market has recovered nicely from 968 over the past two weeks, but the bulls still need to see more. We were on RFD-TV yesterday suggesting that resistance from 999-1004 would be a spot for a producer to consider reducing risk. Sure, we could breakout, but this is the top end of the three-month range which provides an opportunity to be proactive in our minds. This pocket contains trendline resistance, a key Fibonacci retracement, the psychological $10.00 level, along with other technical indicators. Technical support comes in from 983-985 , this pocket represents the 50 and 100 day moving average, along with the 50% retracement (middle of the range) from the June lows to the July highs. If the market continues to hold above this pocket on a closing basis we will continue to have a bullish bias. A break and close below opens the door to 968 . If you look at a one-year chart you can see this has been a significant area for the market, it also represents a key retracement, recent lows.

Bias: Neutral/bullish

Resistance: 999-1004 ***, 1014**, 1021 ****

Support: 983-985 ***, 968 ****, 957-963 ****

WHEAT (March)

Yesterdays Close: March wheat futures traded in a 7-cent range yesterday before closing 5 cents lower and making new contract lows. Funds were estimated sellers of 5,000 contracts on the day.

Fundamentals: Yesterdays export inspections came in at 345,000 metric tons, this was closer to the top end of the expected range from 200,000-400,000 metric tons; last weeks was 260,000 metric tons. Ample supplies and lackluster demand continues to weigh heavy on the market. Yesterdays crop progress report showed that winter wheat conditions are at 51% good/excellent, this is down 1 point from the previous week. Yesterdays Commitment of Traders report showed that funds were near flat from the previous report, their net short position stands at 108,666 contracts.

Technicals: The bears continue to drop the hammer on the market with March futures posting new contract lows yesterday. That lower trade has led to minor weakness in the early morning trade. The bulls have A LOT of work to do to this chart that looks like a technical graveyard. 433 -435 is the first line in the sand they want to see a close above, but they have plenty of work to do beyond that. We continue to suggest selling rallies until we see consecutive closes above more significant technical resistance. The RSI (relative strength index) is at 34 which suggests the market may be getting exhausted on the short term, but we mentioned yesterday on RFD-TV that we would not be surprised to see the $3 handle in this March contract.

Bias: Bearish

Resistance: 433 -435**, 445-447****, 452 **, 478-479****

Support: 422 **, 412 ***, 399-402 ****, 390-392 **

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Oliver Sloup is Vice President of Blue Line Futures, a leading futures and commodities brokerage firm located at the Chicago Board of Trade. Blue Line Futures mission is to put the customer first, and that means bringing YOU the best customer service, consistent and reliable research and state of the art technology.  Oliver has been a guest on CNBC and Bloomberg, among others.  Oliver has over a decade of trading experience. Prior to Blue Line Futures, Oliver worked as the Director of Managed Futures at iiTRADER.

 

 

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