6/7/18

Morning Bullet Points - 06/07/2018

GOOD MORNING—

 

MARKET HIGHLIGHTS

  • Markets trading higher overnight, led by strength in the wheat, which is related to crop concerns in several growing areas around the world.
  • Export sales this morning for wheat were 250,900 MT (250-450 expected), old crop corn 838,600 MT (600-900 expected), new crop corn 418,300 MT (200-400), old crop soybeans 164,800 MT (200-500), new crop soybeans 34,700 MT (200-500)
  • Disappointing old and new crop soybean sales.  Ho-hum corn and soybean sales.  Nothing too shocking here.
  • Fund liquidation continues to be a feature in the corn/soybean markets as a large chunk of the fund long has likely been liquidated.  Fund buying was a feature in the wheat with open interest higher on yesterday’s rally.
  • USDA will be out with their June report on Tuesday.  Areas to monitor are Brazil corn production and Russia wheat production.  Private estimates for Brazil have been running 5-10 MMT less than USDA’s number a month ago.  An early reduction to the Russia wheat crop is unlikely.
  • Global corn stocks on Tuesday’s report will likely be a supportive number.
  • Corn technically is trading near its 200 DMA with the uptrend on hold for now.  Stochastics are quite oversold with support in July from 3.75-3.80.  Resistance is at 3.90 and 3.95.
  • Soybeans technically remain within their trading range with support for Nov. at 10.00 and resistance 10.30.  The market is very oversold.
  • Wheat technically remains in its uptrend with support below the market at 5.15 and resistance at 5.55.

 

WEATHER

  • Above normal temperatures seen over the next 10 days.
  • Better rains were seen across the heart of the Corn Belt over the next 5 days with spotty showers seen the rest of the 15-day period.
  • Overall, the moisture is enough to offset any heat concerns at this early part of the growing season.
  • Russia/Ukraine wheat areas remain dry for the next 10 days.

 

OUTLOOK

  • The bullish outlook for corn has not changed with the recent beneficial weather and strong crop ratings.  The US needs to average 180+ bpa on a national level to prevent global stocks from dropping to extremely tight levels.  The market has done a good job of pushing weak longs out.  Bullish corn was a crowded trade, and I do not think that is the case anymore.  World stocks to usage was forecast to be at 40+ year lows on last month’s USDA report.  With a likely reduction to the Brazil corn crop, that is probably going to be even lower this month.  With corn on a +30 cent break and potentially the most bullish set up since the expansion of the US ethanol industry, I believe this is a place to be a buyer. 
  • Soybeans are a follower.  With the drop in corn, they have pulled back to the bottom of their range.  Look for beans to continue to follow corn.  The soybean fundamentals are not bearish, but they aren’t bullish either.  I do not think the bottom of the range is a place to sell.
  • Wheat continues to separate itself from the corn/bean markets.  If wheat goes higher, it’s going to be supportive for corn feed usage globally.  Technically wheat looks good.  Look for pullbacks to be well supported.

 

Fun Fact of the Day:  According to a new study, tougher job interviews correlate with better employee satisfaction after candidates actually get the job.

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