8/3/18

Morning Bullet Points - 08/03/2018

GOOD MORNING—

 

MARKET HIGHLIGHTS

  • Markets mixed overnight with soybeans under some pressure related to new retaliatory tariffs announced on $60 billion in US goods.
  • The new tariffs are to “guard China’s interests and keep trade frictions from escalating”.
  • Informa will be out with their corn and soybean production forecasts later this morning.  USDA yields are currently 174 (corn) and 48.5 (soybeans).
  • Weather looks a little negative with cooler temperatures in the Midwest and chances for rain in Europe.
  • Monthly jobs report came in at +157,000 vs. expectations closer to +200,000.  Equities are trading near recent highs after the news.
  • CFTC will be out with updated managed fund positions with large net buying expected in corn, soybeans, and wheat.
  • Cash corn movement continues to be noted around the country.
  • Calendar spreads showing some weakness.
  • Corn technically is encountering resistance near its 50 DMA at 3.81 basis Dec.  Support below the market at the 20 DMA near 3.68.
  • Soybeans technically broke support at the bottom of the recently established uptrend.  Support at 8.80 and 8.71.  Resistance above the market at 9.00 and 9.30.
  • Wheat technically posted a reversal after trading limit up yesterday.  The trend is higher, but the market is overbought with support 20-30 cents below the market.
  • USDA reported 130,000 MT of optional origin corn sales to Vietnam for 2018/19.

 

WEATHER

  • Temperatures seen much cooler than the previous forecast runs with normal to below normal temperatures for much of the Midwest over the next couple of weeks.
  • Scattered rains move through the next 5 days, and then turn dry in the 6-10 before chances for showers return in the 11-15.
  • Dry spots in Europe expected to finally see some rains next week, which will help late corn, but is too late for the wheat.

 

OUTLOOK

  • Corn is struggling as it encounters resistance at the 50 DMA.  Cash corn is moving, the market is overbought, the weather is more bearish, so I think there is potential to set back after the recent gains.  Having said that, the big picture outlook is unchanged, so I will look to be a buyer if we get a correction to the 3.70-3.75 area in Dec.
  • Soybeans have been the weak leg as yesterday while wheat traded limit up, beans struggled to trade unchanged.  The US/China trade situation is hurting demand.  The two people most affected by the tariffs have been US producers and Chinese crushers, which is a concern for their demand moving forward.  Because of the weaker relative fundamentals for beans, they will probably struggle unless corn is trading higher.  Because corn looks like it could correct, beans will probably correct as well.  Longer term, I still believe beans can trade higher as long as corn leads the way.
  • Wheat had a moon shot higher yesterday, pushing a lot of weak hands out of the market.  With the pullback from the high, I think we can see more of a correction.  Look for wheat to test support levels in the near term, but I do not think the market is done long term.

 

Fun Fact of the Day:  While receiving a single tattoo temporarily weakens your immune system, receiving several over time could strengthen it.

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