Daily Comments

Weather is the primary motivator for the grain and soy markets to kick off this week.  Beneficial rains move across the Northern Plains and upper Midwest over the weekend, and with more in the forecast for the next seven to 10 days, bears appear to have the better hand, especially in the soy market.

We have at least seen additional export business reported this morning.  The USDA announced sales of 251,460 MT of corn to Mexico and 132,000 MT of beans to China, both for the 2023/24 marketing year.  Outside of this, markets will be gearing up for the August production and supply/demand report scheduled to be released on the 11th.

According to the CFTC, large specs have become a bit disenchanted with their long position in beans.  During the week ending the week ending the 1st of August, they sold over 25,500 contracts of beans, reducing the net long position to 61,475 contracts. They also sold 7,500 contracts of bean oil and 1,170 soy meal, reducing the net long in these markets to 8,300 contracts and 59,685 contracts, respectively.  They did purchase 3,790 contracts of corn, leaving them net short 33,590 contracts but sold 9,500 contracts of Chicago wheat and 3,900 KC.  This leaves them short 61,770 Chicago and returns them to a short position of 1,770 KC.

AgRural now estimates the safrinha corn crop in Brazil will total 105.6 MMT, which compares with 102.9 last year.  They project a total corn production for this year of 135.4 MMT.

News from the financial sector is relatively sparse this morning, and outside of earnings reports, there is not much on the calendar until later in the week.  Trade balance figures will be released tomorrow, CPI data for July on Thursday, and then PPI numbers and consumer sentiment on Friday.

In the macro markets this morning, we find energies and metals under pressure.  Notes and bonds are mixed, the dollar is a few points higher, and equities are strong.

 

Wheat

Nice overnight bounce in September to start out the week, but this far has been stopped against what should be minor resistance at 6.54.  Oscillators are pointed higher, so I suspect this level will be violated, and while we could encounter some moving average line resistance, the door would be open for a poke up to at least the 7.02 to 719 retracement zone and an outside shot at 7.45.  Cycle counts ahead on the 10th, and the 21st.

Last Friday, KC September wheat pressed into lower lows for the swing yet again, eventually closing at the lowest point since the 2nd of May.  There would seem to be little question that the performance over the past couple of weeks presents a longer-term negative outlook, but I have to believe, for now at least, enough is enough to the downside.  The overnight strength has carried up above the 7.60 level, and if we can stabilize over the next day or so, we should be positioned for a corrective rally.  If correct, possible retracement targets will be at 8.20, 8.41, and 8.62.  I am not entirely discounting the possibility for a run at the 79% retracement at 8.92, but that would likely require some surprise positive news.  The next cycle counts will be on the 10th, and the 21st.

Corn

September corn appears to have stabilized at the 4.80 level and is searching for a reason to bounce away from this zone.  Oscillators have begun to turn higher, and a close today above 4.93 ½ should be enough to start triggering buy stops.  If accomplished, there could be some psychological resistance at 5.00, but I believe there will be potential for a stab to the 5.22/5.32 zone and possibly 5.46.  Cycle counts ahead line up for the 14th/16th, and the 25th/28th.

December corn appears to have stabilized at the 5.00/4.90 realm, the same zone where it developed a base in late June/early July.  Of course, at that time, we spent the better part of two weeks chopping around that range and even made a quick poke down to 4.80, and that possibility exists again this time.  That said, oscillators have begun to turn higher, suggesting the next swing will be the upside.  A close today above 5.06 ½ should confirm a low is in place and would open the door for a run back to at least the 5.32/5.42 zone and possibly 5.55.  Cycle counts ahead line up between the 14th/16th, and the 25th/28th.

Soybeans

Lower swing lows to kick off the week in September beans, taking this contract down to the 62% retreatment of the last swing higher at 13.54 ½.  If that level fails to hold on a closing basis, the door will have swung open for a slide to at least 13.13.  Oscillators are already quite oversold, so we may be in store for a rebound before seeing a poke down to that zone.  Cycle counts line up through the 11th, then on the 14th, and the 23rd/25th.

Lower swing lows in November beans as well overnight and a close today below 13.19 should pound another nail into the bull’s coffin.   The next level of support should be found between 12.95 and 12.83, and with oscillators already oversold and trying to turn higher, I suspect the break will be contained at this zone for now.  Cycle counts cluster together now through the 11th, on the 14th, and on the 23rd/25th.

Soy Oil

September bean oil was able to squeak out a higher high to kick off the week but, at this point, has fallen just short of reaching the 50% retracement at 65.66.  Oscillators remain positive, so there is still a possibility that this recovery could extend up to 66.47 and maybe 67.64, but I suspect it would be a real challenge to move beyond that.  Cycle counts line up for today, the 18th, and the 29th.

Soy Meal

September meal did stab in a lower swing low overnight and, in the process, completed a 50% retracement of the last overall swing higher.  With oscillators sitting on the basement floor and a cycle count lining up for today, we should be positioned for a bounce from here.  After today, cycle counts line up for the 18th, and the 29th.  That final date will mark the completion of the 1st cycle of 90-calendar days from the May bottom.

Cotton

December cotton has begun the week on a positive note but remains contained well within last week’s range.  Oscillators are trying to turn higher, and it would appear we should have room for at least a few days of recovery.  Overhead resistance should be encountered at 85.82 and 86.43, but there is a chance for a poke back to 87.29.  Cycle counts ahead line up for today, the 17th, and the 29th.

Lean Hogs

October hogs appear to have found support at the crucial 82/81.25 zone but the bulls are not out of danger quite yet.  Oscillators remain negative so I would expect the bears to try and force this market lower yet.  That said, if we continue to remain above 81.25 on a closing basis, we should be setting the stage for one more push into new highs.  Cycle counts ahead line up for the 14th, and the 24th.  

Live Cattle

Solid performance by the bulls last Friday in the cattle market.  October futures closed at the highest level in two weeks and moved to within striking distance of completing a 79% retracement at 184.07.  Oscillators are already overbought, so we shall see if this is just the last gasp of a dying bull or if they still have enough life to push into higher highs.  The next couple of days should provide the answer.