Technically Speaking

Weekly Analysis: Signs of Value Amid Downtrends

Todd Hultman
By  Todd Hultman , DTN Grains Analyst
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DTN's National Soybean Index has fallen near its lowest level in 10 years, pressured by the anticipation of a record soybean harvest and ongoing concerns regarding trade with China (DTN ProphetX chart).

DTN's National Corn Index ended up 3 cents last week and was down 22 cents in August with ongoing bearish pressure from the anticipation of a large corn harvest this fall. An 18-year view from a monthly chart shows cash corn prices have made a deep correction from the ethanol boom of 2006-2012 and have shown a stable trading range since late 2014 of roughly $2.80 to $4.00 a bushel. With no significant weather problem for the U.S. corn crop in 2018, prices have held a narrow range the past two months and should stay supported above last year's low of $2.95.

DTN's National Soybean Index dropped 16 cents last week and was down 92 cents in August, with demand prospects taking a double-bearish hit from the anticipation of a record soybean harvest in 2018 while the world's largest buyer of soybeans is avoiding the U.S. Long-term, the U.S. and China both have reasons for finding agreeable trade terms. Short-term however, a resolution does not look likely and soybean producers getting checks from the U.S. government make the lower prices more tolerable. The only buyers in this market are commercials finding attractive value at these cheap prices and long-term contrarians. The trend is clearly down.

DTN's National HRW Wheat Index gained 8 cents last week but was down 31 cents in August, posting a possible bearish reversal after two years of rising prices. Overall, HRW wheat prices have been volatile the past 16 years, sensitive to weather in the world's wheat regions but traded largely sideways with support at roughly $3.00 a bushel. Given the current outlook of lower exportable wheat supplies around the world in 2018-19, $4.00 looks like a more reasonable area for support while trading above $6.00 is unlikely without a more serious weather threat.

Comments above are for educational purposes and are not meant to be specific trade recommendations. The buying and selling of grains and grain futures involve substantial risk and are not suitable for everyone.

Todd Hultman can be reached at Todd.Hultman@dtn.com

Follow him on Twitter @ToddHultman

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