6/18/18

Morning Bullet Points - 06/18/2018

GOOD MORNING—

 

MARKET HIGHLIGHTS

  • Markets trading lower again with wheat “catching down” to the corn/soybean markets.
  • July options expire Friday with the largest open interest in corn/beans well above the market at 3.80 and 10.00 respectively.
  • Friday’s CFTC report showed managed funds as net sellers of 77,000 contracts of corn as of last Tuesday to reduce the net long to 36,000, net sellers of 60,000 soybeans to reduce the net long to 13,000, and net sellers of 2,000 wheat to reduce the net long to 15,000.  Moves to finish the week would suggest they are holding net shorts in corn and soybeans.  Some are estimating this was the biggest net selling in soybeans over a two-week period ever.
  • Crop progress this afternoon is expected to show small declines in the corn/soybean ratings, but still at historically high levels.
  • South American bean bids at exports locations are exploding after the announcement of tariffs on US beans.
  • Corn technically is trending lower, and extremely oversold.  Support for July at 3.55 and resistance 3.63.
  • Soybeans technically are in their lower trend with support at 9.00 and resistance 9.30.
  • Wheat technically broke out to the downside with support at 4.83 and resistance 4.96.

 

WEATHER

  • US weather is seen wet over the next week and then spotty showers in the 6-15 period.
  • Temperatures drop this week and are pretty much normal through the beginning of July.
  • Overall, no widespread weather issues in the US.
  • Ukraine is catching some rains while Russia is dry.

 

OUTLOOK

  • Corn continues to see fund selling put pressure on the market.  The global supply outlook is still supportive, but tariffs have spooked any speculative length and the good weather outlook is giving them the confidence to go short.  Longer term, I think the trade wars will blow over and focus will return to the extreme year-over-year drawdowns we are going to see on global stocks, but in the near term, it is hard to say how much things can drop.
  • Beans are clearly taking the brunt of the selling related to the tariffs, but beans also have relatively weaker supply fundamentals moving forward with a potential bump in US acres on the report at the end of the month.  Things are clearly overdone to the downside, so a dead cat bounce seems likely at some point.
  • Wheat is catching down with the corn/beans.  The technicals broke down last week, so look for sellers to step in on rallies until corn/beans can stabilize.

 

Fun Fact of the Day:  Walking through a doorway can cause memory lapses, which is why we walk into another room only to forget what we did.

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