Will Noncommercials Buy the Break?

All ag markets are reacting to somewhat bearish USDA S/D report on Wednesday and recent mid-west rains. One should anticipate that the next Crop conditions report issued on Monday afternoon might show no further deterioration from a week ago as opposed to seeing some deteroration in the crop for the previous two weeks. We still have heat in the longer range forecast and one might expect to see buying interest on this break. The keys to values in the coming days will be the Crop Conditions report on Monday, the 6-10 day forecast and the noncommercial trader's appetite to own soybean futures.

Both Sep and Dec corn sold off quickly and is testing support at 380 and 390 respectivley. Stochastics are indicating further weakness but as I have stated before momentum indicators are not a highly reliable indicator in volatile markets.

The soybean complex faired better than corn as the Nov contract has only experienced a 30 cent drop from the high set earlier this week. Speculators have led this market higher as they carried a sizeable short position into July which they have begun to liquidate. Note the charts below. The first is a snapshot of Noncommercial (speculators) a year ago. Their long position peaked at 320,000 contracts long in June of 2016 the market peaked in early July and then sold off as they liquidated their long. This year, their position peaked at 219,000 contracts short as of the last report leaving them vulnerable to have to cover that short on any sort of bullish news.

Support in Aug soybeans is 1000 then 992. Support in Nov soybeans is 991 then 983.

Long term lows have been set in the wheat market, however, with half of last year’s crop still on hand and farmers eager to plant wheat for 2018, market recovery will take along time. Producers should sell the 2017 crop and price some 2018 crop to hedge against an increase in seeded acres this fall.