4/4/18

Morning Bullet Points - 04/04/2018

HIGHLIGHTS

  • Markets trading sharply lower overnight after China announced a 25% tariff on US bean imports.
  • Corn seeing quite a bit of weakness as well while wheat is holding together well.
  • Equity markets under quite a bit of pressure as well.
  • Managed funds were still heavily long the bean market, long the corn market, and still heavily short wheat.  Look for liquidation to drive moves.
  • Corn technically pulled back to the pre-report trade levels below the 50 DMA before bouncing.  The trend is still higher.
  • Soybean technically have wiped out all pre-report gains with May approaching major support near 9.80 before bouncing overnight.  Beans look to be back in a range-bound trade with 9.80 support and 10.30 resistance.
  • Wheat has pulled back to the lower end of the recent consolidation range, but it looks like we still have a base in place.
  • In a bit of irony, the USDA announced 129 tmt of beans to China for 2018/19.
  • USDA announced 130,000 MT of soybeans to unknown for 2017/18.
  • USDA announced 195,000 MT soybeans to unknown for 2018/19.

 

WEATHER              

  • US winter wheat areas remain dry the next two weeks with KS short-changed.
  • Argentina catching rains, but too late.
  • Brazil is dry in southern areas, with second crop corn seeing some stress.

 

OUTLOOK

  • The headline risk has hit the market with the soybean tariffs trumping any bullish news from the acre report last week.
  • Bigger picture, I don’t know if this will change much as trade flows will likely shift with China buying more beans from Brazil as other Brazil buyers shift more to the US.  In the short-term, though, it’s bearish.
  • For corn, this will make the job of “buying” soybean acres easier, but the total soybean/corn area was bullish.
  • Look for buyers to step in on the pull-back in corn.
  • Wheat has a large fund short, and is largely ignoring the news.

 

Fun Fact of the Day: Texas is referred to as the ‘Lone Star State’ to signify its status as a former independent republic that struggled for independence from Mexico before it joined with the US in the 19th century.

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