After a mostly quiet overnight trade; beans, corn, and wheat spiked higher on rumors that US trade representatives were open to revisiting with the Chinese on trade. More importantly concerns over potential dryness amid surging temps in the Midwest potentially added to the bullish fervor as 90-100 degree temps return to the Midwest this weekend and beyond. Lets be clear here, trade negotiators are open to talking to the Chinese now about having future potential talks. New Crop beans finished 28 cents higher while Corn finished 5 cents higher with spot Chicago and KC wheat up 7 to 8 cents on the close. If “talk of having talks” with China fizzles, it would end up being a classic buy the rumor sell the fact trade. Still beans finished above trend line resistance at 915.2. Its price discovery now as a fifty percent retracement sits at 943.4, which is taken from the late May high at 1060 to the July low at 826 basis November. Old crop/New Crop bean and meal spreads showed some strength finally on today’s rally. Here are two spreads to consider.
Jan 19 beans/Nov 19 beans: A little history here on this bean break as this spread traded 57 cents Jan 19 over Nov 19 to a 27 cent carry (Jan 19 under). An 84 cent break in 6 weeks. This spread finished today at 12.4 cent carry but could explode higher if Beans push higher. Look to be a buyer on the spread and use Nov 18 beans as your trigger to enter or not. If beans can hold 915 to the downside on the charts, this spread can move to 2 cents Jan 19 under all the way to an inversion of 16 cents over which would be a fifty percent retracement to the upside.
Dec 18 soy meal/Dec 19 soy meal: At its peak, Dec 18 meal was 42 handles over Dec 19 meal in Mid-April. The break in beans brought this spread down to 3.9 Dec 18 over, a 37 handle or short ton break from the April highs on this spread. In my view after we get past September 1st and the advent of the new marketing year, we sometimes see meal gain on oil in a seasonal type trade. Outright Dec meal has support right here at 341.3, which was resistance coming into the week and then 332.7 this week. If these support levels hold, look to be a buyer on this spread at 7.0 over or better with a stop under the low at 3.9, risking approx. $320. plus commissions and fees.
In summation, weather scares and the potential to get back to the table with China which would have major ramifications for soy ending stocks, prompted today’s 30 cent rally in my view. Tomorrow I will discuss corn and wheat in tomorrows written report as volatility has returned there as a potential reduction in global crop sizes has ignited a bid in both markets. Note: Unknown destinations has been back buying beans for future shipment according to the last two export sales reports from the USDA. Unknown in the market is spelled C-H-I-N-A. Lets see if they make it three days in a row.
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