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Futures Cash Info Evening Comment for 5-24-16

 

 

 

 

 

 

                                  FUTURES CASH INFO, LLC

 

 

 

My apology as there was not an audio this morning. I had visitors and by the time they left it was past 10:30.

 

Note, ag markets will trade regular time on Friday and will not open up until Tuesday morning regular times.

 

Sales of newly built homes rose to the fastest pace in more than eight years during April with prices jumping steadily on demand running up against limited supplies across the housing market. Newly built homes make up just a tenth of all home sales and the April data came with a margin of error of + or – 15.4%.

 

Bunge declared a $0.42 dividend.

 

WEATHER:   Today’s 1-5 day forecast calls for rain of a half inch to 1.5 inches with 95% coverage for the western Corn Belt. The 6-10 day forecast for the western side calls for average in both temps and precipitation. We should note, for Iowa, June is one of the wettest months.

 

The eastern Corn Belt is forecast to receive .30 – 1 inch of rain in most of the belt with Wisconsin and northern Illinois possibly a bit more. The 6-10 day forecast calls for average temps and average precipitation in the eastern side of the eastern Corn Belt while the western side is forecast below normal.

 

The HRW belt is forecast to see average to above average temperatures with average rainfall in the 6-10 day forecast. The 1-5 day outlook calls for isolated showers.

 

Argentina is forecast in the 6-10 day outlook to see cooler temps with average rainfall.

 

The 6-10 day outlook calls for average temps and precipitation.

 

CORN:   Corn futures tested the April high today but did not exceed it before selling off into the close.

 

Report of an ADM processor in Indiana taking time off for maintenance caught the market by surprise and that along with crude oil rallying today after marking a low on cycle window timing helped corn rally.

 

Funds in the past Commitment of Traders report showed their position long 49,000 contracts. This is not heavy by any means but if one adds corn, soybeans, soymeal, soyoil, and wheat combined fund position together it tallies up to 317,000 contracts. This may sound heavy or reason for a top but note past fund length of the major five when peaks were made:

 

 

7/21/15 – 468,000         9/28/10 – 750,000

12/30/14 – 359,000       12/1/09 – 449,000

4/1/14 – 599,000            6/08/01 – 416,000

8/21/12 – 779,000          11/20/07 – 473,000

2/27/07 – 533,000 

 

This tends to indicate that greater fund length could be seen?

 

I have referred to the “Foreign Production Deficits” since early winter and in the March webinar. I hope to have graphs ready to post either in tomorrow evening’s commentary or in Thursday’s. A picture is worth a thousand words.

 

That said, in April the corn Foreign Production Deficit stood at 42.6 MMT for crop year 2015/16. However, in the May 10^th report, data shows the foreign buyer in need of 44.2 MMT or an increase in “need” of 1.6 MMT. More importantly, for the fourth year in a row, the crop year of 2016/17 is forecast to see the need by the foreign buyer increase 12.8 MMT which puts the tally at 57 MMT which nearly ties the record need by the foreign buyer of 57.7 MMT in 1989/90 and note, the deficit for the crop going into the ground is second largest since 1963/64!

 

This is the fourth year of increased need by the global buyer and this data takes into account increased acres of corn planted in Argentina and the farmer’s willingness to sell due to zero taxation.  As for Brazil, rhetoric continues to indicate that conditions have not improved much for the corn growing areas that have been suffering.

 

Strength in soymeal may also be supporting corn to a degree, but the cattle on feed report would be termed bullish towards corn.

 

Bottom line, with a near-record need by the foreign buyer, the U.S. crop needs to come off without a hitch as the U.S. is the world’s largest exporter of corn and should there be a concern, the market may become much more enthusiastic?  As mentioned in last night’s comment, the monthly Bollinger Bands are extremely tight on a lead contract.

 

For tonight and tomorrow, July corn has resistance at 401 and 407/408 with support at 392 and 389-387.

 

Dec corn has resistance at 405, 407 (seen today as resistance for the week) and 410.  Support is 398, 396, and 392.

 

SOYBEANS:  Looking at the soybean data, we find the current “Foreign Soybean Production Deficit” increased for the current crop year 2015/16 in the May report by 5.85 MMT to 54.55 MMT. That was a large increase and now is quite close to the record since 1963/64 of 55.02 MMT for the crop year of 2011/12. Now we can understand why prices rallied so sharply in 2012 as the U.S. was the main supplier and the data always includes the huge production of Brazil and Argentina just not the U.S. For 2016/17, the foreign deficit is forecast to contract just a tad at 51.65 MMT. That is still a large need and the third largest in history.

 

Weather is sooooo important this year into next year as we are starting this year out with the best expectations until proven otherwise.

 

The processor has good margins and will continue to process but thus far, export sales have not been to stellar recently while soyoil is tending to still catch the buyer’s attention. We should add that domestic soymeal basis is doggy.

 

Again, if making cash sales we suggest doing hedge to arrive and then lock up the basis later.

 

For tonight and tomorrow, July soybeans have resistance at 1069 and 1083 with support at 1042 and 1029.

 

November soybeans have resistance at 1040 and 1052 with support at 1018 and 1008.

 

There is a cycle window on Thursday.

 

WHEAT:   Wheat ended the day soft regardless of concerns over weather dumping too much rain on HRW. Traders will watch the crop condition report on Tuesday and for any signs of deterioration. May become a quality issue.

 

For tonight and tomorrow, July wheat has resistance at 470 and 476 with support at 458 and 452.

 

KC July resistance is 453 and 458 with support at 443 and 433.

 

July crude oil resistance is 4910 and 4965 with support at 4785 and 4715.

 

CATTLE:   As we anticipated, August feeders reached close to the lower Bollinger Band and trend line of support from the channel across the highs of the past few months. Prices reversed and closed in the upper portion of the day’s range. Fats and feeders should be higher on Wednesday but we caution that the cycle window on Thursday may cause the market to slip back on Friday. We plan on texting when the indicators become overdone on the 15 and hourly charts. Tonight, the 60 minute TRx is turned higher and the floater is positive at 15% and the timer is positive at 2%.

 

However, the 15 minute would indicate that the market could see early strength and then kill time or slip off as the TRx is as high as ever, the floater is 95% positive, and the timer is 97% positive.

 

The 180 is also reaching low levels that may help to support a bounce as the TRx is very low and hinting of starting to turn. The floater is 9% negative, and the timer is 15% negative.

 

Feedlots are current and the 120 – day cattle inventory is down 5% from last year.   

 

Bottom line, we think a spring low is not far away. Dealing with the daily chart having just turned, a day and half rally may be all we see for now but when we look at cash and look at the August fats, we think they should be bought in here but are waiting for the right setup. Again, do not forget that the monthly data is flat lined waiting on the weekly to clean up. Just because the weekly is down, does not mean a bounce cannot occur. It just means that the market will not hold very well until a turn is closer.

 

 

 

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