Grain Spreads: Probing

Sean Lusk General Commentary Leave a Comment

I suppose wheat bulls were disappointed with today’s action as the move lower today whisked away much of the Friday/Sunday night rally that sent both Kc and Chicago contracts back under 5.00. All is not lost as I don’t see this market moving that much lower ahead of next weeks USDA crop report. The market received some much needed demand news late last week with number one world buyer Egypt in for a small purchase. We hope its a not a “one and done” tender which has become all too commonplace regarding wheat demand the last few years. Watch 4.88 and 4.80 for Chicago wheat as levels of support.. KC has support at 487 and then 482 also. If both fail to hold, there’s not much support on the charts until the low 460s.  Resistance at 5.04 (Chicago) and 505.2 (KC). With closes over we can eventually move up to at or near 5.30 for both with funds leading the way. Global weather is still an issue but we wont see updated global carryout numbers until the USDA report on the 11.8.

Corn and Beans are still under harvest pressure without reasons to buy so far. We are told trade talks are at a stalemate with the Chinese and I’m suspect here due to the Midterm elections next week. We were at a previous stalemate with Canada over NAFTA 2.0, and all of a sudden a surprise deal was announced when nobody was looking. I’m not saying that lightning strikes twice with a similar deal with China, but a Tweet over trade here or a comment made over there about a framework being put in place should not be ruled out as it can enter the market at anytime. Amid earnings season, the USDA crop report, and a two day FOMC meeting next week, there is much for investors to digest. Corn and Beans look like a race to the bottom here despite the fact we may see lower yield and carry-outs next week. Big deal they are still ample especially for beans. Demand drives price and this crop report will be our last major supply side driven report for the remainder of the year. Beans need a weather market and/or a friendlier demand tone to push. WATCH MEAL! We closed 4 tics below a trendline at 305.5 today which could lead funds who are long 42000 contracts as of October 23rd (COT data) to a test of last years lows at 293.

There are bullish inputs for corn near and long term but demand has waned the last two weeks. Harvest is rolling around after a slow start in early October. Beans are 72 percent complete, while corn is at 63 percent. Both likely will be over 80 percent by next Monday nearing completion by mid-month should weather cooperate. Trade the charts and I will share my trendline levels below.

Dec 18 Corn-Support 358. A close under 353.4. This needs to hold or its 343.4. Resistance 368.4. Over and its 375.2 and then major resistance at 378.4. Over here its 389.

Jan 19 Soybeans-Support 826. Underneath here it can move to 805.4. Underneath here its 765 (20 percent down for the year). Resistance is 854.6, this is key. A close over and its 878.

Dec 18 Meal-Right here at 305.5, minor line at 303, underneath 293-295. Underneath that we could see the 2016 lows at 262. Resistance 310.3. above here its 318 and then 327.

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