Grain markets to see a trend of higher exports?

December 8, 2017 09:52 AM
Daily Grain Report

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CORN (March)
Yesterdays Close: March corn futures closed fractionally lower yesterday after trading in a range of 3 cents on the day.  Funds were estimated sellers of 4,000 contracts during the session.

Fundamentals:  Export sales yesterday came in at 876,400 metric tons, this was within the expected range from 800,000-1,200,000 metric tons.  The bulls will want to start seeing a trend of higher exports in order to inch the floor higher. Weather in South America continues to be the key catalyst market participants will want to keep an eye on.  The talks of La Nina have not helped provide much premium to the market but have put more of a near-term floor in the market.  If rains start showing up on the extended forecasts for Argentina, we could see that floor give way.  We do have a USDA report out next Tuesday, we do not expect any significant changes but will have a convenience table for you this weekend. 

Technicals:  350 was a big magnet for the market for that December contract and appears to be a bit of one recently with the March.  We moved our bearish bias to neutral as we have been marking higher lows over the past three weeks and lower highs over the past month and a half, this is forming a wedge pattern which generally leads to a breakout or a breakdown. The directional move will be on the back of a fundamental catalyst so keep an eye on the wires.  The breakout would likely be more dramatic on short covering from the funds, who have accumulated a near record short position.  We will get later today as to where they stand in the weekly Commitment of Traders report. Technical support remains at 348 ¾-350. On the resistance side, 357-359 is the first pocket we are looking at.  This pocket contains the 50-day moving average, a simple indicator but one we have not closed above since July. 

Bias: Neutral

Resistance: 357-359****, 369 ¼-370 ½***, 375****
Support: 348 ¾-350**, 334-335 ½***, 323-325 ¼**

SOYBEANS (January)
Yesterdays Close: January soybean futures closed down 14 cents yesterday, trading in a range of 18 ¼ cents on the day.  Funds were estimated sellers of 9,000 contracts.

Fundamentals: Export sales yesterday came in at 2,015,800 metric tons, this was well above the expected range from 1,000,000-1,500,000 metric tons.  One would have thought that this would provide some support but that was not the case at the floor open.  Pressure came in on the evaporation of weather premium in South America, or at least that is the headline (price precedes news more times than not).  Argentina is said to be about 53% planted, this was a nice increase from last weeks 42.5% but still lags last years pace of 58%.  We do have a USDA report out next Tuesday; as mentioned with corn, we do not expect any significant changes.  We will have a convenience table out over the weekend with analyst expectations. 

Technicals: The market has given up a bit of ground over the previous two sessions but managed to find support off of the 50-day moving average which came in at 988 yesterday.  There are several other technologies that offer support down to 981 including the 100-day moving average and 50% retracement (middle of the range) for the years trade.  If the market breaks and closes below we could see long liquidation from the funds who have been building a net long position.  The next support pocket comes in from 967-968 ¼.  We continue to have a bullish tilt to the market as we have been seeing higher highs and higher lows over the last month with weather concerns in South America being the “ace in the hole”.

Bias: Neutral/Bullish

Resistance: 999 ¼-1004**, 1015**, 1021 ½****, 1036-1041**
Support: 988 ¼**, 981-984 ¾ ***, 967-968 ¼****

WHEAT (March)
Yesterdays Close: March wheat futures closed 3 ¾ cents lower yesterday after trading in a range of 5 ¾ cents.  Funds were estimated sellers of 3,500 contracts. 

Fundamentals:  Export inspections came in at 321,400 metric tons yesterday, this was within the expected range of 250,000-450,000 metric tons.  As with corn, the market really needs to see a trend of consistent beats in order to provide some sort of support to the market.  One week here and there only provides an opportunity for bears to sell at a higher price.  Ample global supply and dismal demand will continue to keep a lid on any significant rally in the near term.  We do have a USDA report out on Tuesday, this could perhaps shake things up a bit, but we are not expecting anything crazy.  We will have a convenience table of estimates out this weekend for you.

Technicals: The market made new contract lows yesterday at 419 ½ as the bears remain in total control.  There could be some near-term short covering, but we do not recommend trying to pick a bottom.  We have been working with clients to sell rallies, and the only buying we’ve been suggesting recently is just covering shorts and not new long positions.  This is likely true through the market; short covering rallies but no sustainable buying interest.  First technical resistance today comes in from 430-431 ½.  On the support side of things, 412 ¾ is the next line in the sand below yesterdays contract lows.  Though we have been under a lot of pressure this week, the RSI (relative strength index) is only reading 36.  Typically, anything below 30 represents that the selling may be at a near-term exhaustion point. 

Bias: Bearish

Resistance:430-431 ½**, 445-449 ¾ ****, 452 ¾**
Support: 419 ½**, 412 ¾**, 399-402 ¾****

About the Author

Oliver Sloup is Vice President of Blue Line Futures, a leading futures and commodities brokerage firm. Oliver has over a decade of trading experience and has been a guest on CNBC, Bloomberg and RFD TV among others.  Prior to Blue Line Futures, Oliver worked as the Director of Managed Futures at iiTRADER.