Fundamental: Spread trade was active and helped pressure old crop over new crop and helped pressure corn in general compared with soybeans. July corn pushed to a 4-session low as speculative long liquidation selling was thought to be active at times. Talk of the overbought condition of the market and follow-through technical selling after the hook reversal and lower close yesterday helped spark some early selling pressures. There was also talk that speculators were unwinding long corn/short soybean spreads. Planting progress was in line with expectations but there are still 7.57 million acres left to plant for Ohio, Indiana and North Dakota alone. Planted area reached 79% complete by Sunday compared with 63% last week, 92% last year and 88% as the 10 year average for this time of year. Talk of higher production in China to a new record high this year was also seen as a factor to spark some long liquidation selling.
Technical: July corn was sharply lower, finding follow-through selling to confirm yesterday’s minor reversal top. The low-range close below the pivot point suggests a bearish bias, although it is fairly common to see some back and fill after the reversal action of the last two days. The reversal high of 775 is initial resistance, with the April high of 788.76 being next. Support is the 20 and 50-day moving averages at 722-724. Directionals have turned lower from a general overbought condition to favor the sell side. Stochastics are showing a sell signal. The Elliott Wave theory suggests that this week’s rally is the start of another leg higher after an ABC correction. The 138% retracement of the April-May decline suggests an upside objective of 838.
Fundamental: The market saw some solid gains early in the session but weakness in the other grains helped pull futures back to near unchanged to lower on the day for old crop and just slightly higher on the day for new crop. A positive tilt to outside market factors, higher energy prices and talk of liquidation out of corn/soybean spreads helped support moderate gains for the soybean market early in the session today. The weekly crop progress report showed planted acreage at 41% complete compared with 22% last week and 51% last year. The 10 year average for this time of year is 53%. Cash markets were quiet but vegetable oil markets in Europe and Malaysia were strong overnight which helped support oil. A weaker US dollar was seen as a positive force but weakness in wheat was seen as a negative. Ideas that the extended forecast models suggest an opening for eastern Corn Belt producers to get their crop in the ground helped to pressure corn and support new crop soybeans which were up as much as 17 3/4 cents early in the session. Old crop meal gave back much of the early gains and helped to drag soybeans down from the highs into the close.
Technical: July soybeans were slightly lower on Tuesday, posting a lower day with a similar trading range for the previous few sessions. Today’s highs still respected resistance of the 100-day moving average at 1384. The lows found support on the approach to the host of moving averages between 1355-1365. The action is still within the three-month sideways trading range mostly between 1300 and 1400. Directionals have taken on more of a sideways action, with the RSI showing a mid-range value that could support a move in either direction.
Fundamental: Ideas that Russia and India may have large crops this year to offset losses in other regions helped to pressure the market today. Weakness in Europe helped to pressure the US market but a drier outlook for Europe could be seen as supportive. July wheat closed moderately lower on the session and pushed down to the lowest level since May 18th. While the US dollar was slightly lower this morning, talk of the US dollar strength of the past week plus ideas that the market has rallied helped keep a negative export tone in place this morning and the market pushed moderately lower on the day into the mid-session. Winter wheat crop ratings were unchanged and weakness in European futures added to the negative tone. Some traders see rains for the US plains in the near- term plus a forecast for some rains into France next week as reasons for the selling. Some traders have pushed French wheat production down about 3-4 million tonnes from last year’s total of 35.6 million tonnes. Plantings remain behind schedule for spring wheat crops and wet soils for North Dakota and Canada could keep plantings slow into next week.
Technical: July wheat was sharply lower on Tuesday as it retakes some of last week’s gains. The low-range close below the pivot point suggests a bearish bias for Wednesday. Support today was the 20-day moving average of 779.5. The 10-day is at 774 to offer support on follow-through selling. Resistance on last week’s rally was the 100-day moving average, which is currently 821.5. The reversal top left last Thursday managed a high of 834.5, which is key resistance as it roughly aligns with the downtrend line drawn off the Feb and April highs. The chart looks like a big consolidation wedge since topping at about 950 in February and correcting to about 700 in March. This suggests a trade between 730 and 825 until something prompts a breakout. Directionals have no consistent up or down trend, holding mid-range values that could support for a move either way.
Livestock: Live cattle futures were mixed. June was the upside leader, getting August to follow along. October and December were lower, pressured by the bearish placement numbers and continued long liquidation. The 2012 contracts were slightly higher, continuing to get buying on the idea that tight supplies will bolster prices at some point out there. The unwinding of bear spreads was a feature. It is not so much that the market is near-term bullish, but that the charts were oversold and there is less optimism for October and December. There may have been some optimism for June linked to the higher beef prices. However, cash cattle trade has been actively established at about $104, down $4 from last week. Cattle prices could easily stay weak through the summer based on large cattle on feed supplies and seasonally softer demand. June’s $2 discount and August at about par with the current cash market still could attract a lot of sellers, but the oversold condition (i.e. RSI only 9) may make some of them a bit cautious. Updated forecasts are looking for the summer price low to be in the $95-100 price range. Money flow may dictate this as fund longs liquidate and technical traders push the downtrend, but fundamentally those low prices look overdone as much as the $120+ April prices looked overdone. Demand will be the key, expecting export business to stay strong and domestic business the big question mark.
Feeder cattle futures were narrowly mixed. The nearby contracts were slightly higher as they found buying from the oversold condition, the futures discount to cash, and the sharply lower corn futures. The gains were limited amid sharply lower cash feeder prices to start the week. Officially, the most active August contract pegged a reversal bottom, bouncing 232 points from the 120.45 overnight low. The close was only 2 points higher, so the reversal action wasn’t all that convincing. A short covering bounce to confirm the bottoming formation would not be surprising, but it may not mean much if live cattle futures have eyes for lower targets and corn futures have eyes for higher targets. The August feeder cattle contract has support at the reversal lows of 120.45 (all session) and 121.75 (day-pit only). Resistance should be yesterday’s gap of 125.10-125.30. (all session chart).
Lean hog futures were sharply lower on Tuesday. July was the downside leader, falling over 200 points due to long liquidation. That is over 500 points in two days and almost 1500 points in five weeks. The chart has been oversold for all of this month. The traditional funds during this time have switched from a net long position to a net short. Interestingly the cash market is higher than it was a month ago, seeing the lean hog index climb to a high of 95.97 for last Friday. Obviously, the futures selloff was not cash driven. Pork prices have turned soft and cash hog prices are turning soft as well, but that isn’t unusual for the days before the Memorial Day holiday weekend. Renewed strength could come if movement is good and retailers run pork features for Father’s Day and Fourth of July. These features are why it is common for the cash market to be mostly strong into the third week of June. A futures bounce could come just as quick as the selloff of the last two days, if pork and hog prices stabilize and show some strength. The oversold condition and the $8 discount could attract a lot of buyers in short order.
Milk futures were sharply higher on Tuesday, taking back yesterday’s losses. The gains meant that the reversal tops were not confirmed, but the session highs did not take out the reversal highs so the topping formations have not been negated. The action looks consolidation as the milk futures premium waits for the cash markets to catch up. Tuesday’s bullish mentality was easily linked to the higher dairy product prices, seeing butter, powder, and cheese prices all higher. Cheese prices were almost up 3 cents, but with no trades as sellers continue to look for a higher level before parting with their “precious” supply. July and August milk futures flirted with the 19.00 mark again. That psychologically high price level should serve as resistance. It will take some evidence of hot temperatures that hurt milk production to push above that level.