Thursday 4/7/25
Grains:
Post USDA on the 3/31, we have had a nice rally back in CK, despite a very bearish USDA planting number which estimated 93.6 million acres will be planted by US farmers this spring.
That report capped off a 27 cent down-draft and new contract and multi-year low for corn.
Two things I’d watch:
1) The managed funds are still short 150K contracts of corn. A 15 cent rally in CK from the low over the past 8 trading days has yet to spark major short covering by managed funds.
2) Technicals: The favorite of many traders and analyst, the Fibonacci retracement is in play.
How so? the 38%, 50% and 62% retracements are well known. Since they are well known indicators, they tend to be self-fulfilling levels in many cases. In any event, the 50% retracement for CK’s last move came into play today at 3.60 1/2.
The next upside target which might provide resisance: is 3.64, which is the 62% retracement.
Do retracments always work? Absolutely not. However to ignore them or not acknowledge that they are levels other are focused on as “targets” seems silly.
Bottom line, they are good areas to exit and or exit trades. At least that is my opinion after 30 years of watching markets move.
.
Will the funds pull the plug and cover?
Or will they look at this rally as a gift to sell more? Tomorrow’s settlement (Friday) should be key.
Soybeans:
SK just rallied to its highest level in 6 months. This rally was fueled no by a change in any soybean fundamentals.
There is still a large world wide surprise. However, the drought in Asia created a supply shock as Palm Oil shortages spurred prices to the highest level in 2 years.
The managed funds flipped from short 60 K contracts to long 70K contracts in response to the palm oil, anticipating that our bean oil would be in higher demand.
In fact, the funds grew a record long position in bean oil, building a position over 110 K contracts.
My concern here is that, like all bull markets, it needs to be fed with fresh bullish news.
Secondly, we have not seen follow through in the meal. Historically, true bean rallies have been led by meal. Those led by oil, more often than that are short-lived.
Thirdly, the techs are in the picture again, for better or worse. The 200 day moving average is in play. Today in SK that 200-day crosses at 9.03. We settled at 9.04 1/2.
If we stay above the 200-day, that will give the trend-following funds don’t take profits if we settle below the 200-day.
If you were long 70K contracts and just had a 70 cent winning rally, you’d be apt to protect those winnings if the technicals turned south.
Bottom line: Watch that 200-day in SK as it might be a fulcrum for trade moving forward.
Wheat:
WK fell to a 1-month low settlement and the funds are in the driver’s seat. Short 80K contracts, they have had only one 35 cent rally in the past 6 weeks which gave them any heat on that position.
The USDA acres were actually friendly, given the fact that acres were down 2 million from expectations.
Today we had 1-month low settlements, and we have rain enough in the forecast to keep the bulls under pressure.
Will we see any profit taking heading into the weekend?
If so it might play out that means sales in corn, sales in beans and some short covering in the wheat.
Its still early in the months. A lot of seed is still in the bag. Until we get a weather story, this year’s grain market looks to be influenced by the funds money flow in the face of a bearish fundamental picture with the world and the US well supplied with grain.
CER<