A strong crop report pushed corn and wheat lower, but there are still frost and quality concerns with this year’s crop due to the late start, reports Oliver Sloup.
Corn (ZCZ)
Fundamentals: Corn futures broke to new contract lows yesterday in a fairly quiet trading session. Yesterday’s crop progress report showed good/excellent ratings at 58%, up 1 % from the previous week and in line with expectations. Export inspections came in at 355,111 metric tons, below the low end of estimates. The shift in forecasts to warmer weather alleviated some concern over an early frost, a major headwind to start the week. Overall money flow remains week which keeps the bears in control. WE remain neutral/bullish, and cautiously optimistic. The fundamental backdrop regarding production continues to lure people in, but the technicals are undoubtedly bearish.
Technicals: The market took out the low end of the recent range and made new contract lows at $3.60 ½. The market has firmed overnight but is nothing to write home about.
Soybeans (ZSX)
Fundamentals: Soybeans bucked the trend yesterday, coming off the lows and finishing the session near unchanged. Concerns are continuing to mount for the quality/production of the late planted crop, adding some premium to prices. Though we share similar concerns, we believe the lack of a trade deal will keep rallies somewhat limited (see technical section below). Yesterday’s crop progress report showed good/excellent ratings at 55%, unchanged from the previous week and in-line with expectations. Weekly export inspections came in at 1,281,426 metric tons, above the top end of estimates.
Technicals: The market managed to defend support yesterday, potentially marking higher lows.
Chicago Wheat (ZWZ)
Fundamentals: December wheat futures broke to their lowest level since May 13, the day we made contract lows. Export inspections came in at 526,049 metric ton, within the range of expectations. Yesterday’s crop progress report showed spring wheat 55% harvested, within the wide range of estimates. Good/excellent ratings came in at 67%, below the low end of expectations and 2% below last week’s number. The U.S. dollar hit another all-time high (trade weighted) which has continued to be a major headwind for multiple commodities.
Technicals: We have been looking for the ZW/KC wheat spread to come in and yesterday morning we got a little excited, only to see it reverse after the floor open. With that said, it doesn’t change how we feel about the spread. We continue to believe Chicago wheat has more downside than the KC contract at the current levels.
Kansas City Wheat (December)
Technicals: We got a little ahead of our self to start the week/month but still feel upbeat on Kansas City wheat for an intermediate term trade. With that said, yesterday’s price action did trip some important levels which tempers our near-term expectations a bit. We would like to see prices stabilize back above
Bill Baruch provides technical levels on all markets throughout the week at BlueLineFutures.com.
