The grain rally keeps on chugging led by soy meal, wheat, and corn. In meal as I have noted previously saw Argentina make its third soybean purchase in as many weeks. Lower production from the world’s number one bean crusher has been met with Argentina buying US beans for the first time in twenty years in the last 30 days. July meal has rallied up past a weekly resistance of 401.2 to close today at 404.0. Keep an eye out here as the July/Dec meal spread traded from 2.5 short tons July over last week, to 15.0 over, today’s high for the spread. I would not be surprised if July meal pushes to 425.0 which would push July /Dec meal back to the yearly highs at 25.4 July over December. Its all about the meal as soy oil continues to crumble against it. Soybeans though have had a muted response since the Monday morning high up at 10.67 basis July. We have seen some softening there due to hedge pressure from commercial and producers in my view at or near the 1050 level for both old and new crop. Old crop/new crop bean spreads like July18/Nov18 has retreated to just 2.6 cents over from 9 over last week. Nov 18/Nov 19 beans has retreated from 54.6 cents Nov 18 over, which was yesterday’s high to close today at 44.2. It looks like if meal fails here, beans can fall further as funds long 170 K contracts could quickly liquidate some if meal struggles. However if meal keeps pushing higher, look for beans to challenge 1070 eventually, the next meaningful resistance in my view. Watch a meal close below 4.01 this week. If it happens it may put pressure on July beans back down to 10.35.
Wheat-we are now hearing that there might not only be weather issues at home in the hard red winter wheat states but the trade may potentially be worried about global weather issues in Australia, Russia, and South America as well. Hmmm…In my view lets look at KC wheat basis July. If we close above 5.62, its Katy bar the door up to 6.11. Should we close below 5.48. Look for the market to test 5.33 and if that doesn’t hold, 5.16 quickly. KC has rallied against corn to the tune of 20 cents already this week and looks to push to 1.66 July KC over. Watch these levels especially 5.62 or 5.48 on the weekly close above or below the aforementioned levels basis July KC. This spread could push to last years highs at 1.96 KC wheat over if July wheat takes out 5.62 and makes a run for 6.00 in my opinion. This spread is volatile and offers great opportunity if you catch it correctly as it swings 30 to 40 cents quickly in just a few sessions. Use outright July futures as your trigger. With volatility causes immense risk so use tight stops. Call me with questions.
Corn-July resistance at 407.6. A close over and we could push to 4.17. Support is down at 4.01. A close under and 391 is the next level of support. Managed money is re-engaging and despite advances in planting this week, this market sustains a bid. Watch 4.01 though. It needs to hold. If you are looking for a long term buy consider the following Xmas Tree option calls. Buy the Dec 450 call, sell the Dec 520 call and sell the Dec 550 call. Cost 5 cents plus commissions and fees.
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