Grains have been under heavy pressure for the last two weeks, but has the selloff shifted the risk/reward setups back to the buy side?
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Market Recap
Corn
Corn futures were lower on the day but had an impressive session, posting the lows of the day in the first 15 minutes of the 8:30 open and highs (of the day session) in the final minutes of trade. We view this as encouraging and were looking at different ways to gain exposure for potential follow-through ahead of Friday’s report.
Soybeans
Soybeans were the leaders to the upside today with the front month contracts leading the way. After marking new lows then reversing to finish meaningfully higher, we look at that as the first positive development in what seems like a lifetime. Be sure to check out tomorrow’s Grain Express for updated price levels to keep an eye on.
Wheat
The selloff in September wheat is starting to show signs of fatigue. Monday’s opening price action saw the contract trade below the inflection point of April 18th rally, but a strong close pushed price back above that into the day’s close. Stochastic RSI has been stuck in overbought territory since June 3rd, and today’s strong close served as an instance of bullish divergence – meaning that downside momentum is slowing. Do not be surprised if we see a correction higher ahead of Friday’s Acreage and Quarterly Stocks reports.
Crop Progress Snapshot
Corn conditions were reported at 69% good/excellent, down 3% from last week but in line with analyst expectations.
Soybean conditions were reported at 67% good/excellent, down 3% from last week. Analysts were expecting a decline of 2%.
Transcript: In Chicago, Oliver, when we look at the grains right now, whether it’s been a bit of a concern, right? Well,
yeah, I mean, typically this time of year weather becomes a bigger player, especially making more and more headlines. I’ve talked with Scott, many times over the last month, you know, seasonally this isn’t a super great opera time a year to get super bullish on the grain markets as a seasonally where we start to see the market topped out. Now with that said, I think today, this year could potentially be a little bit of a counter trend trade. I think now the last two weeks, we’ve seen the grains just get taken to the woodshed for lack of better terms. And I think we’re starting to see some of the potential risk reward setups shift back to the upside after getting sold off so hard, especially ahead of a big quarterly report on Friday, historically, that’s a big market moving report, we’re gonna get a look at updated acres, as well as ending stocks. So potentially something to look forward to there for the bull camp this afternoon, though, also going to be important, we’ve got crop progress after the close, I think the average annual assessment is to see conditions declined two to 3% for corn and soybeans, and potentially that sparks a little bit of short covering from funds into that Friday report as well. Due to last week’s holiday June to the commitment of traders report, which is typically released on Fridays is pushed back a day, we’ll get an updated look at that as well. And I’ve been looking at the last week and a half, two weeks of trades, you gotta imagine the funds are probably pretty darn close to that record net short position and corn that they had back in February. Now,
we also talk about outside forces hitting the markets, things like elections, right?
Absolutely. And that’s kind of that Then something looming over the soybean trade in particular, I think for the last several months, we know that the Chinese trade and the US trade with China is going to be a big hot button topic this year. And we’ve got an election debate on Thursday. And we expect those headlines with regards to trade and China that really pick up and China for the most part has been really absent this year in terms of soybean purchases from the United States. And I really have a hard time believing that they’re going to come back in a meaningful way ahead of an election with all that uncertainty, they’re gonna try to keep all the cards in their deck,
especially with us really not a major major player in soybean trade. Let’s come back. And we’ll talk livestock markets, though, where the US has been a big player in exports mark. Blue Line futures and Oliver a lot of focus right now on that cattle on feed report. But do we also need to be watching cash trade for this week?
Yeah, absolutely. It’s kind of a tug of war. We got the cattle on feed report Friday afternoon. And I think most analysts would say that it had a bearish tilt. Then we got a cash trade that was just red hot. I think the five area average price for live seers from the USDA was about 195, maybe 195 and change, which is a new high. So you’re seeing these forces kind of come together and battle each other. I would take the cattle on feed report with a little bit of a grain of salt, that data is about a month old. You’ve got the weekend to kind of digest and potentially even forget about it, too. It’s not like a grain report where you get it mid day and see that reaction right away. I think the market has digested that information moved along and sees really the shorter term near term tailwinds to this market which is the cash The cash trade and the good demand which we’ve seen, you know the consumer really be resilient despite some some economic signs of caution, I guess so to speak and recent data. That’s going to be something to keep a close eye on. I think I’m starting to get a little bit more concerned towards the back half of the year later in the year. So I think if you’ve got to get downside protection on these are certainly great prices to consider that.
Yeah, absolutely. The need to just have a good marketing plan. Oliver, thanks for your time, Oliver Sloup Blue Line futures in Chicago