Outside markets came under heavy pressure following yesterday’s Federal Reserve meeting and Ag markets followed suit. What levels should traders be watching?
Grain Market Recap:
Underwhelming export sales and external macroeconomic pressures stemming from yesterday’s FOMC meeting made for a tough day in the grain markets. Corn, soybeans, and wheat all closed today’s session sharply lower. Once again, soybeans bore the brunt of the pain despite having the best supported fundamental outlook in the grain complex. Meanwhile, wheat tested contract lows, and corn tested trendline support.
There were very few silver linings in today’s price action for grain bulls, but one positive takeaway was the December corn contract’s ability to sustain trendline support for the third consecutive session – despite settling 7 ¼ cents lower. Before this morning’s open, a flash sale of 137.2k metric tons was reported to Mexico. Unfortunately, that was largely discounted as routine business, and disappointing export sales took the forefront. Sales this week totaled 566.9k metric tons, which was the bottom of the expected range, and notably lower than last week’s 753.3k metric tons. For the day, Dec corn settled at 475, down 7 ¼ cents. December corn may test trendline support dating back to June 20th tomorrow if we trade down to 467 ½, but our 2-star support picket lies between 460 and 464 ½.
November soybeans were the biggest loser in the grain complex yet again. We’ve made note of soybeans being the best supported component of the grain complex. However, price action follows the path of least resistance, and we’ve trended lower for the majority of the previous three weeks. Opinions aside, it’s unlikely for November soybeans to find support until we test 1286 ¼. Why? First, it is the 50% retracement from the May 31st low and the July 24th high. Secondly, it is the neckline of a possible head-and-shoulders pattern currently developing. If we continue pressing lower, it could be an opportune time to lift longer-held hedge-positions. The sell-off over the previous 5 sessions has been substantial – a correction to the upside would not be surprising if we test 1286 ¼ in tomorrow’s session.
The second silver lining of today’s price action was December wheat’s ability to defend its contract lows. For the day, the contract did close sharply lower – shedding 13 cents to ultimately settle at 575 ¾. We’re close to the most recent contract low, which is 570 even, and if we find support in corn and beans tomorrow, we may see the wheat complex move higher in conjunction with the other components of the grain complex.
Livestock markets got hit hard today, along with most other commodities, following yesterday’s Federal Reserve meeting.
At the close December live cattle were 2.02 lower, settling at 189.5. All in all, this week’s weakness has yet to do any technical damage and has just taken us back to where we were last Thursday. With that said, a break and close back below 189.00 could be the catalyst to spark additional long liquidation, especially if outside markets continue to soften into the weekend. The next support level would come in near 186 which represents previous resistance as well as the 50-day moving average. A break below here could spark long liquidation from funds who have been defending a hefty net long position since the spring.
On the feeder cattle side of things, weakness was the theme also, but only took prices back to where they were last Thursday. r At the close the November contract (most actively traded) was 2.87 lower to settle at 262.70.
December lean hogs screamed higher yesterday, testing the 200-day moving average, which we mentioned in Tuesday’s interview with AgDay TV as being the upper limits of near-term prices. What we didn’t see coming was today’s limit down move. Yes, that’s right, limit down. At the close December lean hogs were 3.75 lower, erasing the last two days of gains to settle at 74.47. Expanded limits of 5.50 will be in place for tomorrow’s trade.