Attention: China announces retaliatory tariffs

CORN (May)

Yesterday’s Close: May corn futures finished yesterdays session down ½ of a cent, trading in a range of 5 ¼ cents on the day. Funds were estimated buyers of 11,000 contracts.

The overnight/early morning trade: At the time we are writing this, May futures are down 13 ¼ cents, trading in a range of 17 cents.

Fundamentals: China released a list of 106 products that will be slapped with a 25% tariff including corn, ethanol and soybeans. This has obviously had a bigger impact on beans, but corn is reacting as you would expect. This “trade war” comes at a very important time of year for producers. We just got planting intentions, and this recent shake up could change things up in a meaningful way. This will be something to keep a very close eye on going forward. Monday starts the weekly planting progress numbers and next Thursday is the WASDE report. We mentioned in yesterday’s report that we were reducing long exposure for some clients, we will be looking to put that on at some point in the near future.

Technicals: The market took out a lot of support levels this morning on the back of the news from China. Technical support from 368 ¾-371 ¾ managed to hold on the first test. This pocket represents the 100-day moving average along with a key Fibonacci retracement level derived from the July highs to the January lows. The market has rebounded to reclaim the 50 and 200 day moving average at 377. Though the overnight volume is good, the floor open will be more important as usual.

Bias: Neutral/Bullish

Resistance: 382 ¾-385**, 393 ¾-395 ¼***, 400 ¾**

Support: 377**, 368 ¾-371 ¾****, 364 ¼-365 ¼***

SOYBEANS (May)

Yesterday’s Close: May soybeans finished yesterdays session up 1 cent, trading in a range of 13 cents, funds were estimated buyers of 3,000 contracts.

The overnight/early morning trade: At the time we are writing this, May soybeans are down 45 cents, trading in a range of 58 ¼ cents.

Fundamentals: China released retaliatory tariffs on 106 products to the tune of 25%, this includes soybeans. Prices broke down on the news and have remained under pressure. As mentioned in the corn section, this is a big headline for this time of year. We mentioned yesterday that we expect more jawboning than anything but remain bearish for other reasons. The jawboning escalated, and this will be a big hurdle for the bulls in the market. We just got planting intentions, and this recent shake up could change things up in a meaningful way. This will be something to keep a very close eye on going forward. Monday starts the weekly planting progress numbers and next Thursday is the WASDE report.

Technicals: Prices broke through a lot of technical levels this morning including all the major moving averages and two retreacement levels. The market made a low of 983 this morning, just above a pocket from 979 ¼-981. If the market breaks down below here we could see long liquidation from the funds press us back to 955 ¾. The market is trying to reclaim the 200-day moving average and a key retracement level which comes in from 1002-1004 ¼. If you have been short the market you will want to use this opportunity to reduce exposure. If you have spec puts on, also consider taking some money off the table as volatility has inflated premiums.

Bias: Bearish

Resistance: 1002-1004 ¼****, 1011-1019 ¼**, 1028**

Support: 979 ¼-981***, 955 ¾****

WHEAT (May)

Yesterday’s Close: May wheat futures finished yesterdays session up 10 ½ cents, trading in a range of 15 ¼ cents. Funds were estimated buyers of 8,500 contracts on the day.

The overnight/early morning trade: At the time we are writing this, May wheat futures are down 8 and have been trading in a range of 14 ½ cents.

Fundamentals: Chinas retaliatory tariffs have put the pressure on producers in the early morning trade with soybeans being the leader but spilling into wheat. It’s unfortunate for the bulls because yesterday was a very constructive session thanks to a friendly crop conditions report. If we see the pressure in corn and beans continue, it will spill over into the wheat market. All in all, wheat has held up relatively well which is encouraging for the bulls despite being red.

Technicals: The market continues to hover around the 100-day moving average as it looks to make a breakout or a breakdown. Between yesterdays price action and this mornings we have turned shifted our tone a bit as price action becomes more stable. In yesterday’s report we had first resistance at 463 ¾-467 ¾, that level was tested and held. If that is retested this week we would expect to see continued buying press us towards 478 ¾. On the flip side, a break down below 440 opens the door to 423 ¾-426 ¾.

Bias: Neutral

Resistance: 463 ¾ -467 ¾****, 478 ¾***, 494-495**

Support: 440**, 423 ¾-426 ¾****