Grains round-up: Bulls in corn

February 26, 2018 09:30 AM

Corn (May)

Last week’s Close (Friday, Feb. 23):  May corn futures finished the week unchanged, trading in a range of 5 ¾ cents through the four sessions.  Friday’s Commitment of Traders report showed funds were buyers of 29,288 contracts which put their net long at 18,674.

Fundamentals:  Little to no moisture in areas of Argentina led to a firm open in last nights trade, that has sense carried over into the early morning trade.  This weeks forecast looks like a lot of the same, little hope for the needed precipitation. Outside of weather concerns in Argentina, we continue to keep an eye on currency fluctuations. The U.S. dollar is under pressure this morning which is giving the commodity space a boost. New crop December futures are only a penny away from that psychologically significant $4 handle; we would not be surprised to see producer selling start to pick up.

Technicals: The market has been consolidating sideways for the better part of the last two weeks as the bulls and the bears wait for new news to give us new direction (other than sideways).  The bulls are in control here as they have managed to make higher highs and higher lows.  

Soybeans (May)

Last Week’s Close:  For the week, may soybeans finished up 16 cents, trading in a range of 19 ¾ cents.  Friday’s Commitment of Traders report showed funds had extended their net long position by 56,242 contracts, putting their net long at 99,111.

Fundamentals: Weather in Argentina was not what the crop needed, and near-term forecasts aren’t doing any favors either; which is good for the bulls and producers here in the states.  This has been the story for the better part of the last month and will continue to be in the near future.  With funds net long in a weather market, coupled with plenty of supply, rainfall would likely put significant pressure on prices.  We would expect US producers to start being more active on new and old crop at these levels.  Soybean meal continues to be a leading indicator for us in the intermediate term as Argentina accounts for nearly half of the worlds shipments. 

Technicals:  The short squeeze continues with prices eclipsing the July highs.  The market is overbought with the RSI (relative strength index) at 73.75.  The rule of thumb is anything over 70 starts to signal overbought.  With that said, if you’ve ever traded soybeans before, you know that the RSI should be taken with a grain of salt when you see a conviction move like we have over the past few weeks. To give you an idea, the RSI in July breached 80.  First support comes in from 1031-1037 ¼, a break and close below will likely trigger long liquidation towards.

Wheat (May)

Last Week’s Close:  For the week, may wheat futures finished 7 ¾ cents lower, trading in a range of 20 ¼ cents. Friday’s Commitment of Traders report showed funds were sellers of 10,208 contracts, putting their net short at 67,039.

Fundamentals:  Insufficient rains in the most important areas have been lackluster to non-existent.  If rain works its way into the forecast in the near future for some of these concerned areas, we could see pressure come back into the market.  We will get an update this afternoon for the monthly hard red wheat ratings, last months good/excellent ratings came in well below analyst projections.  On the macro side of things, we continue to watch currency fluctuations.  The dollar is on defense this morning which has helped provide a bid for multiple commodities with the idea it will help exports.

Technicals:  The market has been trading in about a 20-cent range for the past month as market participants wait for new news to come across the wire.  This morning, prices sit smack dab in the middle of that range.  First technical support today comes in from.

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