1/4/18

Morning Bullet Points - 01/04/2018

GOOD MORNING—

MARKET HIGHLIGHTS

  • Markets trading lower overnight and out of the gates here this morning.
  • Weather shows good rains in the forecast for Argentina.
  • General interest was seen in commodities so far to start 2018 with crude oil seeing strength as of late.
  • Cash markets mixed with corn generally pretty firm while we get through this cold snap/logistical issues.
  • Corn technically ran into 50 DMA resistance yesterday and is trading in the upper end of the range.  Support at 3.50 and resistance 3.55.
  • Soybeans technically have seen some consolidation in the 9.55-9.70 area with next support below there at 9.30 and resistance at 9.80.
  • Wheat technically has made a strong move off the lows to test resistance at its 50 DMA.  Support at 4.23 and resistance at 4.34.

WEATHER   

  • Brazil expected to catch scattered rains over the next 10 days before trending drier in the 11-15.
  • Argentina is dry for the next few days, but scattered rains are seen in the 6-10 with a more widespread event seen in the 11-15 period.
  • Some rains are expected to hit the eastern wheat belt next week, with the majority of HRW areas dry.

OUTLOOK

  • We are a week and a day from the January crop report.  Considering what is likely to be reported from the US and world stocks standpoint, it is hard to believe there will be anything in the report to spark any significant new buying.
  • Having said that, speculators are already loaded up with shorts in corn and wheat and have been establishing new shorts in soybeans the last couple of weeks.
  • We have been seeing strong demand for corn in the US and better demand for US wheat on the world market.  Because demand is so strong, the stocks aren’t as bearish as they would have seemed in years past.
  • Regardless, if the market provides an opportunity to sell near the top of the range before the report, I think downside risk in corn/wheat should be protected.  If we are trading at lows (corn sub-3.40 and wheat sub 4.10) I don’t think there is good risk/reward for being short those markets.  I think you have to look for the range-trade to continue and adjust positions depending on where the market is.
  • Soybeans are a different story with South America looking more and more likely, they will raise a monster crop again.  They have some adjusting to do as they have been priced high relative to corn/wheat, and it is probably more important to protect downside risk in soybeans for the numbers a week from tomorrow.

Fun Fact of the Day:  The temperature when both the Celsius and Fahrenheit scales are the same is -40 degrees (feels like that today!).

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