5/7/18

Morning Bullet Points - 05/07/2018

GOOD MORNING—

MARKET HIGHLIGHTS

  • Markets trading lower overnight with soybeans seeing follow-through from Friday’s weakness, wheat apparently pushing out enough speculative shorts, and corn being pulled lower.
  • The USDA will release their May crop report on Thursday to provide the first look at 2018/19 balance sheets.  Full estimates will be sent out later, but the general theme is expected to be a sizable drop in world corn supplies year over year, bean supplies are expected to be essentially flat, and wheat supplies considerably lower.
  • Friday’s CFTC report showed managed funds as net buyers of 63,000 corn to push the net long to 186,000, net buyers of 7,000 soybeans to push the net long out to 177,000, and net buyers of 26,000 wheat to reduce the net short to 28,000.  The trade on Wednesday and Thursday featured aggressive buying as well.
  • Planting progress this afternoon is expected to be close to 40% this afternoon (released at 3pm CST).
  • US/China trade talks last week were lacking of any major resolutions.
  • Corn technically is consolidating near the top of the range.  The market is starting to correct from overbought conditions with July support in the mid-3.90’s and resistance 4.05.  The longer-term trend remains higher.
  • Soybeans technically are pulling back to the lower end of the range we’ve seen the last couple months, but remain in the upper portion of the range we’ve seen the last few years.  Support for July is at 10.30 and resistance 10.50 and 10.80.
  • Wheat technically is pulling back from overbought conditions with support near 5.00 and resistance 5.30.

WEATHER         

  • Stretches of dry weather over the next couple of weeks should allow for planting progress to catch up to near normal.
  • Argentina is wet the next few days before drying out.
  • Dry areas in S. Brazil have chances for rains in the 6-10 and 11-15 periods.

OUTLOOK

  • We will get one of the bigger reports of the year on Thursday when the USDA releases their first 2018/19 balance sheets.
  • Corn is overbought, and some may argue has priced in a “bullish” set of numbers on Thursday.  We have a lot of speculative long interest in the market, which makes it vulnerable to a correction.  Regardless, the numbers should be constructive and keep the market on pace to trade higher over time.  Be in a position to buy corn on a pullback if it is provided.
  • Soybeans are pulling back as the market is loaded up with speculative length and China is still not buying any US soybeans.  World bean supplies are not going to be as tight as corn, but the outlook is unlikely to be overly bearish.  We may need to push out more speculative length, but the Argentine crop failure changed the world balance sheets enough to make higher prices likely over time.
  • Wheat appears to have pushed out enough spec. short interest.  USDA reports are nearly always bearish wheat, so maybe the market is trying to price that in ahead of the numbers.  A further pullback is probably necessary if the market is to trade higher over time.  If wheat gets back to the 5.00 area, I think it is a buy.  The longer-term technical outlook is constructive.

Fun Fact of the Day:  If you want to completely escape Earth's gravity and travel to another moon or planet you need to be going at a speed of at least 7 miles per second or about 25,000 miles per hour.

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