Today's grains: weather, setbacks and dollar gains

Corn

To start the week corn saw a minor setback but was enough to take out Friday's low. This breaks a streak of 6 straight sessions where July had higher lows. While this is one of the larger setbacks seen in a while it is far from making the July chart look poor. Trade spent the day expecting that the first GTE rating for the year would come in at 71% which is right in line with the 5-year average. This starting GTE rating could finally set the stage for trade moving forward.

After nearly 3 weeks of little fundamental news to trade from, corn will now start getting this weekly update, which traders can use to guide yield thoughts. Various weather concerns will still cause market movement but trade will always keep an eye on this GTE rating to see if any dry or wet weather was enough to cause national concern. First chart support comes in July at 395 1/4 which will be a target for sellers if this slide continues.

Short term, the starting GTE rating should start to affect trade as quickly as tomorrow. Longer term the forecast maps will offer longer term influence and if any dryness is found, there could be a sizable reaction. With trade already looking to hear a La Nina warm/dry pattern even a short term dry forecast map could cause a reaction.

Bulls

Solid support was seen throughout the day on Monday, which helped to limit the downside seen today
Going forward bulls will be looking for any reason to start lowering the GTE rating from today's starting point
First chart support for more aggressive buying to step in would be 395 1/4 in the July

Bears

Volume was not large but it was still a bit larger than seen on buying days giving a slight edge to bears
Bears not only want to see a solid corn GTE rating but also need to see the wheat GTE rating to remain strong offering spill over resistance from wheat
If corn can find a GTE rating as high as 76% there could be reason to slip back to 370 area support as long as forecast maps are not overly dry

 

Soybean

Soybeans began the holiday shortened week on a bearish note. Good weather and news that China is beginning its weekly sales of beans out of it reserves had traders booking profits. The Eastern Corn Belt had a dry three day weekend and that allowed for producers to make some big planting gains. Soybean plantings are expected to increase from last week's 56% to 69% complete on tonight’s report. If we have reached the 69% number, it would be over the 66% five year average for this point in time.

A 13% gain over the previous week is just over the normal gain of 12%. The forecast is for a good mixture of sun and rain over the next 10 days which should allow for the newly planted beans to “pop” and give the ones out of the ground a good start. The Argentina forecast is for sunshine which will help their harvest to progress down there. The funds didn’t make any big adjustments to their positions last week. They were sellers of 2,980 contracts for the week ended last Tuesday. That ended six straight weeks of purchases. Their current position, at 202,173 contracts net long, is just off the 205,153 net long from one week ago. This is the second best long position since March 4, of 2014.

We anticipate that the market will continue its wild day to day price swings until trade gets a better handle of Argentina crop size, potential acreage adjustments on the June 30th reports, as well as the summer weather. With many in the trade anticipating a hot dry summer we are hesitant to get too bearish until we see how accurate the forecast is.

Long term I would recommend buying puts in front of the June acreage numbers as I think we will see a big increase (possibly 2+ million) in bean acres compared to the March numbers. If we increase acres as anticipated, and do not have a major weather problem this summer, we will have more than enough beans to meet the USDA’s aggressive demand outlook

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