Headline Driven was the theme for the week for grains as beans and wheat pivoted hard from mid week lows to finish higher. Last Friday I was considering hiring a bugler to play TAPS regarding corn, bean, and wheat prices as the USDA submitted overly bearish data in their monthly supply/demand report. Beans looked like the weak link off the complex as yield was raised to a near record while ending stocks were put some 35 percent higher than the old record high. If that wasn’t enough the tariff overhang on the markets that has seemed to extinguish any demand from our biggest buyer remained. Over supply and no demand equals lower prices and that is what occurred last Friday. A few thoughts on whats transpired this week and what to look for or consider. A trade delegation from China will be returning to the US in a surprise announcement made this past Wednesday night that propelled beans to move 30 cents higher Thursday. To me it gave new shorts in the market and funds reasons to cover amid potential demand returning. I’m not sure the demand ever left as China still has been an active buyer on the USDA’s export sales reports for new crop purchase. That is an argument we can set aside for now. This to me was the news event for the week for beans and in my view prompted the mid-week reversal. In today’s trade, beans broke 14 cents giving back half the Thursday rally, then rallied to unchanged near the close, finishing 4 cents lower on the day. Beans finished 30 cents higher this week.Next week starts private crop tours in the Midwest along with Monday’s key condition report at 3 pm. Rains hit some areas of need this week with more potentially over the weekend. The Chinese are scheduled to visit Washington DC on (8/21-22) to discuss trade with Agriculture a potential talking point. We could see a spike in volatility by the weekend as next Friday is September option expiration. In my opinion trade the charts and consider these levels. For Nov beans: Support next week is at 883.4. A close under and 856.6 is next. A close under and its 826. Resistance is 906. A close over and 924 is next. A close above that level and its 946.0, then the 50 percent retracement at 955.4.
The second announcement or item that was unforeseen in my view were rumors that Russia’s Ag Minister met with exporters to discuss a cap on grain exports amid this year’s productions shortfall. Livestock operations in Russia are lobbying for some kind of intervention in an effort to keep prices reasonable which is also rumored. Whats aiding futures prices as well is that Gulf HRW is competitive with Russian origin for Nov/Dec arrival. Russian interior wheat prices continue to rise in both ruble and US dollar terms. Replacement costs this week in Southern Russia (near ports) rests at $177/MT, vs. $150 in early July and $163 a year ago. Export sales for future shipment came in at the highest total since January 2017. This has given thoughts to demand returning for US wheat as global production wanes. Not bearish in my view but we need to see a few weeks of sales besting expectations for confirmation. Chicago wheat has a near term upside target at 589-592 basis September. A close over 6.00, could push us to 6.44. If long be out on close under 548.6. a hard close under and the market could retrace down to 514.
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