Grains Drop on a Friday

  • Posted on: October 16, 2015

October 16, 2015 Written by Chris Robinson Corn: December corn settled up 1 ¼ cent at $3.76 ¾. Corn came under pressure overnight and into the first half hour of trade, when CZ fell to a new 5-week low at $3.72 ½. With no follow through selling, CZ chopped back a nickel from the lows to finish near the high. For the week, CZ dropped 6 cents. On the longer-term weekly charts, CZ posted its lowest settlement in 4 weeks. Exports came in at 22 million bushels; for the marketing year, export commitments total 427.4 mil/bu. This is a disappointing 243 million bushels less than last year. Informa came out with estimates for 2016 corn acres and production today. Using 90.8 million acres and a trend line yield of 168.9 that projects to a 14.079 billion bushel crop for 2016. The funds came in today long an estimated 73K contracts. CZ remains below all the major moving averages, 50, 100, and 200-days, which come at $3.81, $3.89 and $3.96 ¾ respectively. Technically, CZ settled smack-dab-in-the middle of its 8-week, 42 cent trading range bounded by the contract low at $3.57 ½ and $4.00. The real “what-if” remains what the funds will do with their position totaling 70K contracts or 350 million bushels. Hedgers: No change in recommendations. Wheat: December wheat settled down 10 ¼ cents at $4.92 ¼ which is the lowest settlement in one month. Ditto on the 1-month low settlements for KCZ, at $4.83 ½ and MWZ at $5.12 ¼. For the week, WZ lost 17 cents. Wheat export sales were 16.9 million bushels, within expectations. Export commitments, however, dropped to 435 million bushels, down 94 million bushels from last year. After a 1-month, 68 ½ cent rally from contract lows, WZ, as of today’s low price, gave back 41 ¾ cents, or 61% of that rally. What took 6-weeks, or 30 trading days to build up evaporated 62% in just 7 trading days. These re-in forces the tried and true adage that markets rally “up the escalator” only to correct lower “down the elevator shaft”. Managed funds entered today short just 26K contracts, but sold an estimated 5K contracts on above average volume. A wetter forecast for the Plains, as well as timely rains in Russia covering 50% of their dry areas finally took the starch out of the winter wheat bulls. Informa came out today with estimates for 2016. The main item was the drop in US acres by 744K to 54.0 million. The 50, 100, and 200-day moving averages at $5.00, $5.20 ¼ and $5.29 ¼, respectively, all fell by the way-side over the past 7 trading days. The failure of the $5.00/50-day moving average today looked to be the trigger for fresh “sell” orders. Current winter wheat planting was 64% planted vs. a 66% average pace. Hedgers: No change in recommendations. Soybeans: November soybeans settled down 7 cents at $8.98 ¼. Beans saw only a 13 cent trading range today in relatively light trade especially for a Friday and a day when wheat and corn were taking it on the chin early. November did settle below the psychologically important $9.00 level. For the week, however, SX gained 12-1/2 cents. Exports were 54.3 million bushels . The 100 and 200-day moving averages are at 9.26 ½ and $9.44 ½ did not come into play today as SX remained well those. Tuesday’s 2-month high at $9.19 ¾ marked a 66 ½ rally from the contract low posted on the USDA report released 9/11/15. Today’s correction marked a 22 ½ cents a loss of 1/3 of that rally. Informa came out with 2016 estimated acres of 83.9 million, up 700K acres. With a trend line yield at 46.2 that gives us a 3.848 billion bushel crop. Weekly exports came in at 54.3 million bushels. Year to date, export commitments are 860 million bushels; down 263 million than last year. The funds are only short 9K contracts of beans which is relatively minuscule. Planting progress in Mato Grosso was 14.3% vs.9.3% a year ago. The rains predicted for at least 50% coverage are just in time as reports of dryness had been touted over the past 2 weeks. Hedgers: No change in recommendations. After good rallies in both the wheat and the soybeans over the last month, once again we had profit taking instead of new longs as we close out the week in the grains. The weakest link was the wheat. It fell out of bed today, and while it was the first to lead us up; lets hope its not the first to lead the rest of the grains back down. The market is searching for the next story, be it fundamental or technical. In the absence of any new fundamental changes, grains continue to be at the mercy of the technical traders. The market bit hard on stories of dryness in Russia, and earlier this week, dryness in Brazil. It seemed like the whole world had discovered el nino and decided to tout long positions in grain. As soon as the rains were back in play, suddenly every one switched to the technicals. To call this grain market mercurial is an understatement. We remain stuck in these trading ranges, waiting for the sustained break out. Stay pat with your hedges and keep looking ahead for better opportunities to sell more physical bushels and also start looking at hedges for 2016. As long as you keep the upside open, you’ll be in good shape to take advantage of higher prices by making good cash grain sales when they present themselves. CER Have a great and safe weekend.