Daily grains outlook: Soybeans, corn & wheat

Corn (December)

Yesterday’s Close:  December corn futures finished yesterday’s session down ¾ of a cent, trading in a range of 6 ½ cents.  Funds were estimated to have been sellers of 10,000 contracts for the day.

Fundamentals:  The market was little changed by the close as it appears market participants have fully digested the information released in Tuesday’s USDA report.  Yesterday’s weekly EIA report showed ethanol production increased to 1.053 million barrels per day, up from the 1.041 million barrels per day last week; we are now 5.1% over last year.  Export sales this morning came in at 1,176,600 metric tons, towards the top end of the estimates.  Weather will continue to be an extremely important catalyst for the intermediate term, conditions have been favorable for most growing areas thus far. There is a chance that we could get updates on Chinese tariffs today, some of that is likely baked into the cake at this point. 

Technicals:  The market has been trading in wider ranges this week as market participants square things up and reposition their book.  397 ½-399 ¼ is the hurdle that the bulls want to overcome and close above, this would likely encourage additional short covering.

Soybeans (November)

Yesterday’s Close:  November soybean futures finished yesterday’s session 16 cents lower, trading in a range of 23 ¼ cents.  Funds were estimated sellers of 18,000 contracts.

Fundamentals:  Funds have been quick to exit their net long position, after this week there is a good chance they are close to being net flat and possibly even net short, just two weeks ago they held a net long position of 100,000+ futures.  We are expected to hear more on trade and Chinese tariffs before the week is over, some of the concern is likely priced into the market near these levels (buy the rumor sell the news).  Weekly export sales this morning came in at 810,600 metric tons, above expectations.

Technicals: The RSI (relative strength index) continues to make new lows right alongside the board, with a reading of 25.10 this is now the most oversold this contract has ever been.  We don’t mind playing it from the long side for a short-term trade despite all the technical damage, with that said, it could get worse before it gets better.  Buyers are trying to keep powder dry for a panic/capitulation like trade that will give this market a quick and healthy correction. 

Wheat (July)

Yesterday’s Close:  July wheat futures finished yesterday’s session down 17 ½ cents, trading in a range of 24 ¼ cents.  Funds were estimated sellers of 7,000 contracts for the day.

Fundamentals:  Wheat futures gave back gains yesterday which has spilled into the overnight and early morning session.  Winter wheat harvest continues, and the market is not finding enough bad news to support prices, that coupled with significant weakness in corn and beans does not do the market any favors.  Weekly Export sales this morning came in at 302,300 metric tons, within the range of expectations. 

Technicals:  The wheat chart has held up substantially better than corn and beans, but that could be changing if the bears cannot defend support levels to round out the week.  The market broke down below our 523-pivot area which has encouraged additional selling.  The market is now testing our pocket from 502 ¾-50 6 ¼, this pocket represents a key retracement on the year, the 50-day moving average, and previously important price points.  

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. He has been a guest on CNBC and Bloomberg and has over a decade of trading experience.