Written by Chris Robinson
Corn: July corn settled up 10 cents at $4.59. For the week, CN dropped 5 ¾ cents, while new crop CZ gained ¼ cent. CZ fell to a new 5-month low today, but then rallied back impressively clawing back 12 cents from that low to settle up 10 ½ cents at $4.57 ½. CZ posted a large outside-up-day on the daily charts. In the past 20 trading days CZ dropped 69 ½ cents, or 14%. The market vaporized 85% of its 5-month, 82 cent rally. CN has dropped 75 ¾ cents over the same time frame, or 74% of its 5-month, $1.02 rally. CN posted a fresh 4-month low at $4.47 today before bouncing 12 cents on a rush to the exits. Next week’s action should give us a better idea of whether this was trend-change, or simply profit taking going into the first weekend of June. Also, we do have fresh USDA information coming at us Wednesday the 11th with production and supply/demand information. The Goldman roll began today and is expected to last through Thursday. Hedgers: No change in recommendations.
Wheat: July wheat settled up 12 ½ cents at $6.18 ¼. KCN settled up 21 ½ cents at $7.35 ½. For the week, WN dropped 9 cents, while KCN gained 12 cents. In the past 23 trading sessions, WN dropped $1.41 or 19%. Today’s low at $6.03 was the lowest tick in 13-weeks. Today’s low marked the loss of 78% of the rally the bulls enjoyed which began on January 30th and ended on the May 6th 1-year high up at $7.44. A lot of traders were looking at getting a$6.00 print today in WN. The low was $6.03 and the failure to get that print probably emboldened speculative longs. It also prevented existing bears from adding new short positions. Monday’s open interest and COT report should give us a better picture as to the nature of this sell off. A rally here at the end of the week, especially with a USDA report looming on Wednesday the 11th was not that un-expected. Hedgers: WN options expire in just 13 trading days. If you need more time, make sure you look at either an August or a September option.
Soybeans: July soybeans settled down 3 ½ cents at $14.57, which is a one-month low settlement. For the week, SN dropped 36 ¼ cents. SN lost 80 cents in the last 11 trading days. Support below comes at $14.41 which is the 2-month low posted on 5/7/14. The Goldman roll began today, which will see the index sell July contracts and move into November. The July-November spread took it on the chin today, losing 11 ¾ cents to settle at $2.38. That spread traded out to a contract high on Monday at $2.77 ½. For the week, that spread dropped 39 cents, or 14%. As for new crop flat price, SX bounced back nicely from yesterday (Thursday’s) 2-month low at $12.01. These round numbers have immense psychological importance to both speculators and hedgers. That $12.00 support will be key for new crop beans as we progress through the growing season. Hedgers: No change in recommendations.
We are moving into the time of the year where most of the focus is on the weather forecast. For now the reality of the situation is the weather looks almost ideal. The outside markets were once again friendly as the Dow traded to a new high at 16,917 and now looks to have 17,000 in its cross hairs. The S&P looks towards the 2,000 level after posting a new record high today at 1,949. In the grains, the corn and wheat have just suffered a nasty price haircut in the past 20 days. The beans have held in so far at the $12.00 mark for the new crop.
The funds are still long corn and beans. If they decide to adjust or flip, today’s rally might be short lived. If, however, the weather turns hot and dry, I’m sure the funds will be there to defend their long commodity bet with fresh money. The risk for the bulls and the un-hedged producer is the flip side. If their computer programs flash “SELL”, you can rest assured they won’t be sending out courtesy e-mails and text messages prior to that decision. Your best bet is to hedge the downside risk and continue to hope for higher cash prices so you can sell your physical grain when you want to rather than when you feel like you have no choice. Have a great and safe weekend.
CER