Daily grains outlook: Soybeans, corn & wheat

June 5, 2018 01:46 PM

Corn (December)

Yesterday’s Close (Monday, June 4):  December corn futures finished the session down 9 ¾ cents, trading in a range of 9 cents on the day.  Funds were estimated sellers of 30,000 contracts to start the week.

Fundamentals:  Yesterday’s weekly crop progress report showed that the U.S. corn crop is now 97% planted wand 78% of it is rated good/excellent; this is down 1% from last weeks near record number.  Good weather and a great start to the growing season have led funds and producers to take risk off the table after enjoying a nice 5-month rally.  The rush to reduce risk has seemingly fed on itself and has led to what we feel is an overreaction.  The crop is far from made which leads us to believe that the chance for a premium to come back into the market is good, especially when you couple that with some significant technical support levels.  The significant pressure in wheat and beans certainly hasn’t done any favors for corn either. 

Technicals:  To say there has been technical damage to the corn chart would be an understatement.  December corn futures have given up nearly 30 cents in just a week, evaporating the gains from the previous two months.  With that said, the RSI (relative strength index) is approaching the most oversold levels we have seen since we made a low in December. 

Soybeans (November)

Yesterday’s Close (Monday, June 4):  November soybean futures finished the session down 20 ½ cents, trading in a range of 12 ½ cents.  Funds were estimated sellers of 12,500 contracts.

Fundamentals:  The market has struggled to hold ground in the face of lingering concerns over the potential for an escalating “trade war”.  These types of headlines will continue to be a key catalyst in near term price discovery.  Yesterday’s weekly crop progress report showed that the US soybean crop is now 87% planted, a 12% increase from last week.  Yesterday’s report was the first crop condition rating of the year for beans, that came in at 75% good/excellent which ties with the 2010 rating for the best rating (for this time of year). 

Technicals:  The market has been range bound for the better part of the last two months which leads us to believe there is more room to work to the downside.  First technical support this morning comes in from 1013 ¾-1015 ¾.  This pocket represents a key retracement on the year and the May 18th highs before the gap higher.  A break and close below this pocket opens the door to additional pressure via long liquidation.  We see significant support coming in from 1002-1007.  This pocket represents the May 17th lows, the 200-day moving average, a key Fibonacci retracement, and trendline support from last June’s lows.  This pocket represents an opportunity for shorts to cover and value buyers to step in. 

Bias: Bearish

Resistance: 1024 ¾-1025 ½**, 1034-1034 ¾**, 1040 ¾***

Support:  1013 ¾-1015 ¾ ***, 1002-1007****

Wheat (July)

Yesterday’s Close (Monday, June 4):  July wheat futures finished yesterday’s session down 15 ¾ cents, trading in a range of 18 cents.  Funds were estimated sellers of 13,000 contracts.

Fundamentals:  Wheat futures sold off hard to start the week as winter wheat harvest continues and reports surface that yields may not be as bad as previously thought (shocker).  The new concern that is alleviation some of the pressure is weather overseas, particularly in the Black Sea region and Australia where the weather has been hot and dry.  If more favorable conditions work their way into the forecasts, expect to see the selling accelerate.  Yesterday’s weekly crop progress report showed that winter wheat conditions fell 1% to 37% good/excellent.  The first look at spring wheat conditions came in at 70% good/excellent.

Technicals:  The market held our four-star support level perfectly yesterday, we defined that in yesterday’s report as 498 ¼-502 ¾.  This pocket represents the 50-day moving average, a key retracement level, and previously important price points.  The market may try to stage a relief rally towards the gap at 523, but until the market closes above there the bears will remain in control.  

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