CORN (December)
Yesterday’s Close: December corn futures closed 5 ½ cents lower, trading in a range of 9 cents on the day. Funds were estimated sellers of 26,000 contracts.
Fundamentals: The USDA report has come and gone leaving the perma-bulls in a dark place. Yesterday’s USDA report showed a projected yield of 175.4 bushels per acre, this was not only above the top end of analyst estimates, but would also be a new record yield. Nebraska and Michigan were the only states that saw a revision lower from the October estimates. 14 out of the top 20 producing states are set to out yield last year’s crop. Keep in mind that though harvest is nearly complete, these are not final and subject to change in the coming months. In fact, we have seen revisions lower from November to January each of the last four years. Corn production came in at 14.578 billion bushels, above the high end of estimates at 14.459. US ending stocks came in at 2.487 billion bushels, also above the high end of estimates at 2.438 billion bushels. Attention will start to turn towards South America where they continue to plant. Their production estimates were in line with expectations. Argentina is 35% planted, this is slightly behind their average pace.
Technicals: The market had been looking for a fundamental catalyst for a break out or a break down for the past two months. There is no disputing that yesterday’s report was bearish, but the price action was certainly interesting. If you were just watching the tap for 10 minutes following the report you would have thought it was a neutral number with prices dipping but then trading back to pre-report prices. Many read this as: “if they can’t break the market on such a bearish number the funds are out of powder“. Anxious and impatient got sucked into the market only to watch prices bleed lower throughout the afternoon. New contract lows and new closing lows could lead to more pressure down to 335. Lower highs and lower lows keep the bears in control. Remember: The only thing you get from picking bottoms is stinky fingers.
Bias: Bearish
Resistance: 350 ¾**, 355¼***, 360-362***
Support: 334-335 ½***, 323-325 ¼**
SOYBEANS (January)
Yesterday’s Close: January soybeans closed 12 cents lower, trading in a range of 24 ¾ cents on the day. Funds were estimated sellers of 12,000 contracts on the session.
Fundamentals: Yesterdays USDA report was more neutral than price would lead you to believe. Yield estimates pre-report were from 48.9-49.9, USDA came in at 49.5 bushels per acre. Of the 20 top producing states, eight states saw a decline in yields, five states saw increase in yields, and seven were left unchanged; bringing the net to unchanged from last month. Production came in at 4.425 billion
bushels, this was also within the range of estimates from 4.375-4.467 billion bushels. Ending stocks came in at 425 million bushels, this compares to the range from 377-461 million bushels (average estimate of 420). South American production numbers were relatively neutral. Weather conditions and crop development in Brazil and Argentina will be the main focus over the intermediate term.
Technicals: The chart has been a compared to a modern-day Picasso as of late, holding trendline support from the August lows multiple times over the past several months. Yesterday’s price action did do some damage, but the bulls remain in control. As mentioned in yesterday’s report, we see good support in the market from 980-984 ½. This pocket represents the 50% retracement from the June lows to the July highs; it also contains the 50, 100, and 200 day moving average. If the market closes below this support pocket, we could see a flush down to 968 ¼. If you are interested in the long side this is the spot to look at working orders. If you are in the bear camp, this is will you will want to reduce. If you have questions with regards to how to use the technical levels, we publish please let us know.
Bias: Bullish
Resistance: 999 ¼-1004 ¾**, 1014**, 1021 ½****
Support: 980-984 ½***, 968 ¼****, 957-963 ¼****
WHEAT (December)
Yesterday’s Close: December wheat futures closed 3 ¼ cents higher, trading in a range of 8 ¼ cents on the day. Funds were estimated to have been buyers of 4,000 contracts on the session.
Fundamentals: Wheat futures held well considering the heavy pressure in corn and beans following yesterday’s USDA report. Ending stocks for wheat came in at .935 billion bushels, this was a hair below the low end of estimates from .940-.980. World ending stocks came in at 267.53 million metric tons, this was within the estimated range from 261-269 million metric tons. On top of that, we saw good export sales in the morning! Export sales came in at 781,800 metric tons, this was a marketing year high and topped the high end of (low) expectations with Iraq being the top buyer. Wheat bulls will want to see higher exports become a trend in order to put a floor in this market.
Technicals: We have posted higher lows on the week and look to be on the verge of higher highs if we can see follow through above 431 ¼. This will be a start in forming a sturdy base, but the bears will remain in control until we start seeing consecutive closes above resistance from 438 ¼-443. A failure to breakout could lead to new contract lows over the intermediate term. If the market is able to get back out above resistance in the near future, we could see funds start to reduce some of their short position.
Bias: Bearish
Resistance: 431 ¼**, 438 ¼*** 443****, 462 ¾**, 478-479****
Support: 422 ½*, 415 ¼**, 399-402 ¾****, 390-392 ¼**
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