Profit taking amid liquidation was the end of the week theme in the grains as corn, wheat, and beans fell in tandem following yesterday’s Supply & Demand report from the USDA. Despite some bullish inputs for corn and beans regarding new crop ending stocks in beans and global ending stocks in corn, funds liquidated ignoring the data in my view, thus sending corn and beans lower.
Soy Complex: The bean market gave back sizable gains which sent beans to trend line support at 1003.0 basis July. Old crop/New crop bean and meal spreads fell this week although the selling was more pronounced in beans than meal regarding the spreads. The issue there is old crop carryout which is ample at 530 million bushels vs new crop at 415. Old crop beans may need a new story and without help from a meal driven rally, soybeans may be destined to test 983 and then 970 on the charts soon. New crop bean carryout missed expectations badly and were considered bullish versus expectations as they came in 115 million bushels lower than the average trade guess. Normally this would of sent beans 30 cents higher on report day but that didn’t happen here. The trade seemed to discount the USDA’s aggressive stance on future exports and projected yield. The ending stock data will be adjusted accordingly following the June Supply/Demand and end of month acreage reports. Beans need soymeal to hold 374 next week or July beans could drop to major trend line support at 970 in my opinion.
Trade: Sell July/Dec meal at July 7.5 over, with a stop at 11.0 over. Looking for a move down to parity if meal continues to work lower.
Wheat/Corn: Wheat has pushed almost 60 cents lower from last weeks highs while corn has given back 11 cents. There were no bullish inputs for wheat as new crop ending stocks had slight adjustments lower while the USDA didn’t report on any abandonment in the hard red winter wheat areas stricken by drought. Corn acted as tail of the dog, following beans and wheat lower in my view. Corn though broke support basis July at 400.4 and could work to the next support area at 390 before we see a bounce. Corn gained on all wheat classes and looks to potentially tighten further. KC wheat in my view needs to hold 5.16/5.17. Should it fall further I look for KC to fall to 5.02 and then 4.96 basis July. A close over 534.4 next week and we can retest the highs. Watch this weeks close in KC wheat and the spread vs corn. If KC falls apart, it will tighten vs corn from this week’s settle at 1.21-1.22 over to 91 cents KC over.
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