Technically Speaking

Chart Analysis: U.S. Cash Grain Prices

Todd Hultman
By  Todd Hultman , DTN Lead Analyst
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DTN's index of cash corn prices has fallen back from resistance at $3.52 and price momentum has turned bearish. However, the potential for lower prices appears limited as corn prices are fundamentally cheap and the funds (green line) are already heavily net short. (DTN ProphetX chart)

Corn: DTN's National Corn Index was down roughly 6 cents last week to $3.34 a bushel -- a new three month low with bearish pressure coming from the anticipation of larger crops in Brazil and Argentina in early 2019. Technically speaking, the bullish momentum following harvest has been broken and the trend has turned down after hitting resistance at $3.52. For producers, there has not been much of a selling opportunity yet in 2019, but the year is still young and planting will be a challenge this spring. The potential for lower prices appears limited for corn as prices are already fundamentally cheap and managed futures funds are already heavily net short 192,847 contracts as of March 5.

Soybeans: DTN's National Soybean Index dropped 20 cents last week to $8.06 1/2 -- its lowest close in over a month. Like corn, cash soybeans have also run into resistance but have been able to hold a narrow, sideways range. Trade talks with China continue and the uncertainty of not knowing how they will play out has kept noncommercial activity limited, currently lightly net short. Fundamentally, projections of a growing soybean surplus in the U.S. are a serious bearish concern, but it is also encouraging that commercials continue to hold net long positions on the futures board at soybeans' lower price levels.

K.C. wheat: DTN's National HRW Wheat Index dropped 9 1/2 cents to $4.11 last week -- its lowest close in over a year. It was the fifth consecutive weekly tumble that has now erased a quick 74 cents from prices that previously held a gain of over a dollar per bushel in 2018. After such a sharp drop, the trend is obviously down in wheat. However, there are reasons to watch for support on the horizon. Prices first brock upward at $3.80 in early 2018 and that can be an expected area of support. With the recent drop in prices, we now see noncommercials lightly net short and managed funds net short 46,678 contracts. Those two contrarian indicators suggest further selling potential should be limited. It is also encouraging that commercials were net long 12,836 contracts of K.C. wheat on March 5, which is a modest vote of confidence for the new cheaper price.

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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