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Weekend Ag Update (Grains & Livestock)


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Weekend Ag Update

March 17, 2019

Our thoughts and prayers are with those throughout the Midwest who have been affected by last weeks storm.



Corn


Last Weeks Close: May corn futures finished Fridays session up 2 cents, extending gains for the week to 8 cents. Fridays Commitment of Traders report showed funds holding a all-time record short position of 257,965 futures and options. The funds also hold a record net short position in grain and oilseeds combined, short 504k futures and options.


Quick Take: We often say that the bottom is a process, not a point. Last weeks price action was extremely constructive to that process taking place. Looking at the chart alone, we would expect to see follow through momentum in this weeks trade. Positive technicals coupled with what we believe are positive fundamentals have us feeling very optimistic about higher prices over the intermediate term. Funds hold a record net short position with planting season just around the corner, a time of year where we seem to always get some weather premium baked into the market. The recent weather through the Midwest may be enough to spark those fears early and cause a meaningful round of short covering from the funds. Check out our daily Grain Express tomorrow morning for the levels to watch this week.


Soybeans


Last Weeks Close:May soybean futures finished Fridays session up 10 cents, trading in a range of 12 cents. Fridays Commitment of Traders report showed funds sold roughly 40,000 contracts for the week ending March 12th, putting their net short position at 90,197 futures and options. This is not a record net short position, but it is big enough to register in the top 10, coming in at the 8th largest short position on record. The funds also hold a record net short position in grain and oilseeds combined, short 504k futures and options.


Quick Take: Soybeans managed to breakout above technical resistance on Friday, putting a more positive spin on the technical landscape. We want to be friendlier on soybeans but feel that of the three sisters (corn, beans and wheat), beans may be the least clear picture. Part of this due to the ongoing trade dispute with China. Check out our daily Grain Express tomorrow morning for the levels to watch this week.


Wheat


Last Weeks Close: May wheat futures finished Fridays session up 7 cents, extending gains for the week to 21 cents. Fridays Commitment of Traders report showed funds holding a net short position of 72,148 futures and options and an all wheat short position of 130,327 futures and options. The funds also hold a record net short position in grain and oilseeds combined, short 504k futures and options.


Quick Take: Wheat futures had closed lower for 5 consecutive weeks, last weeks round of short covering helped to end that streak. Last weeks price action has constructive on the chart which has us feeling more optimistic about higher prices in the near-term. If the bulls can achieve consecutive closes above resistance in the first half of this weeks trade, we could see another round of short covering add 25+ cents to prices. Check out our daily Grain Express tomorrow morning for the levels to watch this week.


Live Cattle



Last Weeks Close: April live cattle futures finished Fridays session up 1.725, trimming losses for the week to .675. Fridays Commitment of Traders report showed funds holding a net long position of 128,713 futures and options, this is a good amount of length for funds to be holding.


Quick Take: In last weeks Weekend Update we talked about the funds net long position being a risk to long liquidation, we got that on Tuesday after the market broke down below trendline support from the November lows. In the back half of the week prices managed to retrace to that breakdown point, which now becomes resistance. It should be noted that the retracement was on light volume. From the risk/reward perspective, shorts have an advantage here. A close above resistance would neutralize the chart. Cash trade last week was reported at 127 in KS, WY, TX, and Western Nebraska, we believe this will be viewed as a disappointment to the board.


Feeder Cattle


Last Weeks Close: April feeder cattle finished Fridays session up 2.325, trimming losses for the week to .775. Fridays Commitment of Traders report showed funds bought back roughly 1,000 contracts through March 12th, trimming their net short position to 1,225 futures and options.



Quick Take: Volatility has been the name of the game, over the past seven sessions, the average daily range has been 2.31. The volatility has been very non-directional as we continue to be confined to a range of 144-147 (give or take). This will be the range to continue to trade until we get confirmation of a true breakout or breakdown.


Lean Hogs


Last Weeks Close: April lean hogs finished Fridays session limit up, extending gains for the week to 8.075. Fridays Commitment of Traders report showed that funds bough back roughly 2,600 contracts through March 12th, trimming their net short position to a hair over 3,600.


Quick Take: The swift move higher has taken the RSI to overbought territory, this alone is not a reason to try and short the market. Trying to pick a top is just as dangerous as trying to pick a bottom, especially when funds still have a net short position, giving them plenty of room to build a sizeable net long position. The catalyst for that position reversal would be the ASF which has been documented for months, but only taken more seriously here over the last few weeks. Exports were great last week with China being a big buyer, if this becomes a trend, we could see this market continue to accelerate to the upside. Expect volatility to remain high, if you buy or sell and plan on holding the position, just mentally prepare yourself for a 4.00 move against you at some point.



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About the author


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.

 

 

Contributing author since 10/6/17 

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