DTN Midday Grain Comments 07/01 11:30
All Grains Lower at Midday
Trade is lower at midday with wheat being the downside leader.
By David Fiala
DTN Contributing Analyst
The U.S. stock markets are higher with the Dow index up 136 points. The
interest rate products are higher. The dollar index is 47 points higher.
Energies are lower with crude down $1.40. Livestock trade has cattle sharply
higher, and hogs mixed. Precious metals are mixed with gold down $2.
Corn trade is 7 cents lower at midday with corn seeing spillover pressure
from wheat and soybeans along with ideas the rally yesterday was overdone. The
weekly EIA ethanol production number showed production 2.62% lower, with stocks
1.55% lower. This was mildly negative ethanol and corn. The USDA reports were
slightly friendly versus expectations yesterday but the sustained strength
surprised about everyone. Weather forecasts will be watched closely with
concerns about nitrogen loss, and slow development due to the areas that have
been or are too wet. The midday action illustrates the market is doubting the
rally was needed yesterday, but respect is still around for the potential for
short covering to kick in again. This rally has market around 70 cents above
the lows printed just two weeks ago. On the December chart, support is now the
200-day moving average at $4.02, which we are now well above. Resistance is at
the $4.40 December high then the $4.50 12-month high.
Soybean trade is 10 to 15 cents lower at midday with trade seeing renewed
selling tied to a better weather forecast and still ample world supplies. Meal
is $4 to $5 lower and oil is 45 to 55 points lower. A tighter than expected
stocks report was the surprise on the soybean report yesterday. The June 1
stocks number was 625 million bushels vs. the average trade guess of 675
million; this is still 220 million above the 405 million bushel number a year
ago. The range of estimates was 604-770. The planted acreage number was 85.14
million acres versus the March 84.64 million acres; his increase was expected.
The market is pricing-in unplanted acreage and/or yield loss due to the wet
conditions, but late planting should accelerate this week. This should be the
item noted for further strength near term, but in our view the biggest concern
here is big volatility the rest of the week due to short covering/margin calls.
No major change should be expected on the new crop world balance sheet albeit
it will be tighter both on old crop and new crop versus the June report. On the
November chart the 200-day moving average at $9.71 is support with $10.56
resistance which is our 10-month high. The close yesterday is $1.40 above the
contract low printed on June 15.
Wheat trade 26 to 36 cents lower across the three contracts at midday with
the weaker row crop action and ample world supplies and improved weather
weighing on the market. Drier weather should boost harvest progress this week.
Quarterly USDA June 1 wheat stocks were higher than expected at 753 million
bushels vs. the average trade guess of 712 million bushels; this is also well
above the 590 million bushel number from a year ago, the range of estimates was
650-765 million. The all wheat acreage number was 56.1 million acres vs. the
estimate is 55.7 million acres versus 55.37 in March. On the September Kansas
City wheat chart support is at the $5.79 200-day with limited resistance to
note above the market, and we are back near this area at midday. The major high
is the December 2014 high just above $7.
David Fiala is a DTN contributing analyst and the President of FuturesOne
and a registered Trading Advisor.
David Fiala can be reached at firstname.lastname@example.org
Follow David Fiala on Twitter @davidfiala
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