Lackluster Trade Brings Questions

In Monday’s Crop Condition report USDA said that the nation’s corn and soybean crop continued its deterioration. In fact, all 10 top corn producing states reported deteriorating conditions. Despite that, market action this week has been lackluster, to say the least. In any other year, one would have expected limit up trade with news like that. What makes this year different? Two things seem to keep popping up. First, weather models have not offered solid agreement on medium term forecast allowing for uneasiness among traders. Second, we seem to be losing the effect that managed money has on commodity futures these days. Ag media writers have reported that managed money funds have not been successful speculators. We wonder if we have lost the power money flow to the Ag market.

Sep corn broke support and traded as low as 368 last week but rallied from there to nearly 390. Current support is 380 then 365. Farmers holding old crop should watch momentum indicators like stochastics and avoid selling on weak or weakling indicators and target selling strong or strengthening values. Your MAC merchandiser can advise you on those values.

Dec corn held support of 380 trading as low as 381 in the past week and is currently trading 400. Stochastics are strengthening but still somewhat oversold. Target sales between 405 and 415. Watch for a stochastic value over 80 to confirm a sale. 420 is the contract high and should be tested sometime this summer.

Both Aug and Nov soybeans broke short term support in the past week. The bullishness in the ag markets started after USDA announced in their June 30th Planted Acres report that we planted 800,000 fewer acres of soybeans than had been previously predicted. At the time the trade seemed to ignore the fact that even though we seeded fewer acres than had been predicted it was still 3 million acres more than was seeded a year ago. The country is facing the potential for a massive soybean crop. Both weakening basis and widening futures spreads and anticipating the same. Producers must continue to protect themselves against falling prices by selling rallies. Current support in the Aug contract is the 200 day moving average of 1002, below that , 970. Support in Nov soybeans is 984. Target 1035 to advance sales.

Wheat has traded in a very disappointing fashion in the past week. The market seems to have absorbed all the bullish data that exists to date. All short term support has been broken. Stochastics are very oversold, therefore I cannot recommend sales here. Support is 493 in the Sep contract.