Technically Speaking

DTN's Cash Indices Show Bullish Changes

After soybeans attained the highest good-to-excellent crop rating in at least 10 years in early August, cash soybean prices turned due north the rest of the month, propelled by hot, dry weather and a surge of new-crop export sales (DTN ProphetX chart).

DTN National Cash Soybean Index:

DTN's index of cash U.S. soybean prices finished up 45 cents last week at a new 2-year high of $8.99, boosted by crop concerns after a recent stretch of hot, dry weather and by a sudden rash of new-crop soybean sales, mostly to China. Soybean prices clearly had a bearish start to the year and the 100-day average played an important part in describing the price action. The average defined resistance in February and March as concerns about the coronavirus grew. In June and early August, the 100-day average defined support for prices, offering a hint of this month's bullish move. The uncertainty of weather and China's level of demand is adding to price volatility and the highest spot cash price in two years is likely to encourage farmer selling. For now, the trend is clearly up.

DTN National Cash Corn Index:

DTN's index of cash U.S. corn prices closed 20 cents higher last week, ending at $3.26 and just 1 cent shy of the previous high in July. To say 2020 has been a bearish year for corn prices is an understatement as demand suffered on all three fronts: exports, livestock markets and ethanol demand. The corn crop also looked good in early August before being hit with a damaging windstorm in the central Midwest and the past three weeks of hot and dry weather. Drought concerns, once limited to the Western Corn Belt, have now spread to a larger area. Technically, the price action in corn was largely bearish after breaking a new low in mid-March related to increased coronavirus concerns. The April low of $2.77 was among the lowest corn closes in 13 years and prices have stabilized since, closing back above the 100-day average in mid-August. CFTC data showed managed futures funds net short 71,166 as of Aug. 25, so there is more upside potential with potential resistance at $3.27 and $3.50.

DTN National Cash HRW Wheat Index:

DTN's index of U.S. HRW wheat prices closed 17 cents higher at $4.41 Friday, Aug. 28, the highest close in over two months. Cash HRW wheat prices broke below the 100-day average in mid-May and traded mostly below the average until Thursday, Aug. 27. Prices were held down the past three months by the anticipation of another record world wheat crop and record ending stocks in 2020-21. The bearish expectation still holds, but has largely been traded, while increased corn exports have traders wondering if wheat exports will also increase. Technically, U.S. HRW wheat prices have been in a choppy, corrective pattern most of 2020. Friday's $4.41 close is the first bullish breakout from that pattern and turned the weekly stochastic up -- a confirming signal this market has fresh bullish potential as producers get ready to plant a new winter crop in the U.S.

Comments above are for educational purposes and are not meant to be specific trade recommendations. The buying and selling of commodities or commodity futures involves substantial risk and are not suitable for everyone.

Tregg Cronin can be reached at tmcronin31@gmail.com

Follow Tregg Cronin on Twitter @5thWave_tcronin

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