Look out grain traders

Trading wrap-up for Tuesday, May 27.

Corn

Fundamental Support: Overnight traders took out both the next support in July corn as well as the 50% retracement level. That opened the door for even more technical selling to go along with the already bearish fundamental outlook. So far the El Nino “cruise control” weather pattern offering little or no threats is playing out just as forecast. Almost all growing areas see some rains in the 10 day forecast with all of those areas remaining at or slightly above average temperatures. At this time that forecast remains nearly ideal so looking back at the technicals next support is around 440 in July and 450 in December.


Old crop traders:

  • There could be some interest in spreads as weather suggests December falling faster than July
  • As price continues to drop this relationship could pick up even more as buyers could be more active old

New crop traders:

  • The noon GFS maps suggest light/moderate rains for almost all growing areas
  • Temperatures remain at or slightly above average to help pick up needed growing degrees
  • Next support is expected in the 450′s

Bulls:

  • The best place to be buying is in July and more importantly in July spreads
  • We can say it forever that that this market deserves a bounce but something has to spark that bounce first

Bears:

  • Forecasts remains nearly ideal
  • The next strong support is not found for another 15 – 20 cents after today’s close
  • Funds are still estimated long over 200K positions which looms overhead as possible future liquidation

 

Soybeans

Fundamental Support: The bean market sold off hard today as an aggressive weekend of planting gave market bears the upper hand. The trade was thinking that the planting pace had jumped to 55% by the end of the weekend. Last week only 33% of the crop had been planted. The average planting pace for this date is 56%. After the close the USDA reported that 59% of the crop has now been planted. Last year 41% of the crop had been planted by this date. The USDA reported that 25% of this year’s crop is emerged vs 12% last year and 27% on average. The trade is viewing the weather forecast as negative as it calls for a mixture of rain and warmth that should get the crop off to a great start. Adding to the negative tone was Friday’s CFTC report that showed that managed longs had shed 11,000 contracts of length showing that they are losing some of their bullish enthusiasm.

Over the weekend there was renewed talk that Chinese buyers were again having trouble opening lines of credit for Brazil beans and this means the more distressed beans are probably on the way to the US. The Chinese government continues to sell beans out of their reserve as they sold another 244 tmt of beans overnight out of the 300 tmt offered. The CME group has lowered the initial margin for speculators to $3,300 down from $4,050. Allendale looks for the bean market to grind lower. With a record amount of beans being imported into the US combined with the anticipated record amount of beans are being planted the soybean supply should not be an issue late summer into the fall. When this happens we would expect the market to sell off hard.

 

Wheat 

Fundamental Support: Wheat finished lower today as rains that moved through Texas, Okla., and Eastern Kansas were about as expected. Most of the rains missed western Kansas which is going to leave the wheat struggling. Ratings are expected to increase 1% with today’s crop progress. We will have to watch the Poor to Very Poor ratings to see if there is any improvement. Export inspections were neutral, falling within trade expectations. The trade recently has seen a large amount of fund interest exiting the market to the long side as the commitment of traders on Friday showed net liquidation of longs. Right now with the fall in the market, all we can look at is can we see the funds stand aside or even reenter long positions? Right now money flow is what we are seeing control this market. Spring wheat planting is expected to continue to be behind pace as the major growing areas have continued to see above average rainfall for this time of year.

To put this into perspective we have dropped $1.04 in the soft July contract and 1.19 in the hard July contract. Both these contracts have dropped about 13.9% over the last two weeks of trade from the highs. Historically we do not see many moves of this magnitude however it speaks to how hard we rallied to see this market retrace almost this entire move from April. Continue to look for additional downside until we see the funds stop removing longs or adding new shorts.

  • Export inspections 507,888 tonnes within trade estimates of 450-575,000 tonnes
  • Ukraine’s Ag. ministry state the country exported 30.9 million tonnes of grain since the start of their marketing year, 8.87 million tonnes of this was wheat
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