DECEMBER CORN FUTURES:
In just the past 12 trading days we have seen December corn collapse, moving down over $1.05 per bushel from the secondary high set on June 10. Good rains, with the promise of more to come, have rolled through the Central and Eastern Corn Belt, leading to modest fund long liquidation.
A ruling by the Supreme Court on Friday in favor of refineries rather than ethanol producers, sent corn reeling even more. However, depending on corn stocks and seeding estimates released on Wednesday's USDA report, there are still both fundamental and technical reasons we could see corn futures pop back up, especially if the acreage or stocks report does not hold a bearish surprise.
For the first time in quite a while, Friday's December corn closed near the 100-day moving average and momentum indicators are approaching oversold. An area of major support is roughly 20 cents to 25 cents below, which should hold corn on a further break. Fundamentally, some analysts see both U.S. exports and corn used for ethanol as severely understated. Extended weather appears to point to a return of hot and dry, with a ridge moving from west to east as corn begins to pollinate in July.
In the absence of a bearish stocks and seeding surprise in the Wednesday reports, we have likely not seen the end of corn strength.
NOVEMBER SOYBEAN FUTURES:
Similar to new-crop corn futures, new-crop November beans have taken the brunt of massive long liquidation lately and have now fallen over $2.00 per bushel just since June 7. The world vegetable oils market, which had been the primary catalyst for the bullish oilseeds market, had a major correction, providing plenty of pressure on the soy market.
From a technical standpoint, we have the 20-day moving average threatening to cross over the 50-day average to the downside -- often a bearish indicator. However, momentum indicators are fairly oversold and funds have whittled down their once large net long. Soybean stocks, currently at or close to a pipeline level of 140 million bushels (mb), will require at least 90 million acres (ma) just to keep stocks at a pipeline level with trend yield. According to the Dow Jones trader survey, expectations are for a seeding number closer to 89.2 ma. China also continues to return to buy U.S. new-crop beans, with China and unknown buying over 43 mb last week.
In the absence of a bearish stocks and/or seeding number in Wednesday's USDA report, the soybean market could return to a more bullish posture again, as both the Northern Plains and Canadian Prairies (canola) continue to bake under hot and dry conditions and new-crop soy demand should shift to the U.S.
KANSAS CITY DECEMBER FUTURES:
Kansas City September and December wheat futures have fallen to a long- term trend line that began in August of 2020. The market seems to be respecting that trend.
Despite the ongoing hard winter harvest and world production nearing a record large level, there are some reasons to be optimistic about wheat futures in the next several months.
Dryness in the U.S. Northern Plains, the Pacific Northwest and the Canadian Prairies looks certain to clip some major production of both hard spring and the much sought after soft white wheat market. Also, although most competitor crops are in good shape, there is growing concern about heat and dryness for parts of the spring wheat regions in Russia and Kazakhstan.
As in corn and soybeans, funds have whittled down their long positions in all three wheat markets, giving them plenty of firepower to add length in the future. Major exporter wheat stocks are at a multi-year low, with any future production losses likely to lead to another rally.
Comments above are for educational purposes and are not meant to be specific trade recommendations. The buying and selling of grain and soybean futures involve substantial risk and are not suitable for everyone.
Dana Mantini can be reached at: firstname.lastname@example.org
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