The Grains Complex II,II

 

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Today in history in 1960, a Cold War incident involving Francis Gary Power and his $LMT U-2 spy plane, is shot down over the Soviet Union, sparking a diplomatic crisis.

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Turning to the markets, stocks are lower this morning, as politics are taking a front seat while earnings are relegated to the back of our minds. President Trump extended the deadline for exemptions on Steel and Aluminum Tariffs for the E.U., Canada, and for Mexico. However, given the political turmoil in Europe, most notably that the Italians have yet to forge a government after. two months of trying; the E.U. is saying the extended deadline still it’s enough to come up with a proposal regarding the steel and aluminum tariffs.

Prime Minister Netanyahu is also pushing equities lower with his claim that Iran is still cheating on the nuclear arms deal. Claiming Iran are “infamous liars”, putting all the impetus on what to do in the meantime regarding Iran and the upcoming May 12th deadline.

Crude Oil briefly touched $69 / barrel yesterday and currently off 88 bps or 1.28% as we write. Gold futures are at $ 1307.50, down $11.70 per ounce. As you might expect from the above combination, the dollar is stronger, now positive for the year.

Earnings note helping the broad market today as Pharma beats on EPS but misses on Revenue. Both Pizer and Merck beat on their adjusted EPS versus estimates, however, both their sales revenue missed the mark on analyst estimates.

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Screenshot 2018-05-01 13.21.27The eight-year-wide support structure at 10% below the 36-month average has already been used three times (arrows). A monthly close for May of $52.38 or lower will break that massive support. That number won’t change by more than a few cents for June. –MSA 360

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The key structure will be violated at 5% below the 36-month average. A monthly close in May of $32.04 or lower (about 12% below the current market price) would break that ,assive support level. That number will rise by about $0.05 per month. Arrows indicate where support has been used and defined. – MSA 360

We also have the ISM manufacturing index print at 10:00am, which since bottoming back in the fall/winter of 2015 and the early winter of 2016 when the index fell to 48 and when “recession” fears were abounding, the ISM Manufacturing Index has been on a tear to the upside, peaking at 61. Last month the index was 59 with expectations being that of little movement to unchanged.

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Next, in economic news, we have Construction spending for March, which is certain to be erratic.

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Over the course of the past four years, we’ve seen Construction Spending fall 2.0% one month and then rebound +1.7% the next. Last reported month, February, construction spending rose a tepid +0.1% and it is expected to be +0.5% this month.

Lastly, Canadian GDP for February will be reported, remembering that it fell 0.1% MoM in January and the consensus on Bay Street has it rising 0.3% MoM.

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Weather:

If the QPF is accurate, planting in the WCB is going to slow down a bit over the next few days. Up to 4″ of rain is expected to accumulate in eastern NE, IA, and WI between now and Sunday, with some hail or tornados thrown in.


Corn

Corn futures are currently 1 cent per bushel higher after 1 to 3 cent gains in most contracts yesterday. Preliminary open interest rose 18,739 contracts yesterday, suggesting some net new buying interest.  Monday morning’s Export Inspections report indicated 1.465 MMT of corn was shipped for the week of 4/26. That was down 15.7% from a week ago but was 29.55% larger than this week last year. On Monday evening, NASS reported that 17% of the crop was planted as of Sunday, a 12% move from the previous week and on the slow side of trade expectations. That is lagging the average by 10% and is well behind last year’s 32%. There were 576 contracts put out vs. May futures deliveries overnight, a huge jump from 10 the previous session. Commercial LDC was the big provider of receipts, with RJO customers the biggest stoppers.

Corn futures are mostly 3 to 4 1/2 cents higher at the moment. The monthly ethanol crush report from the USDA will be released this afternoon.

May 18 Corn is at $3.96 1/2, up 4 cents,
Jul 18 Corn is at $4.05 1/4, up 4 1/2 cents,
Sep 18 Corn is at $4.12, up 4 1/2 cents
Dec 18 Corn is at $4.19 1/4, up 3 1/4 cents

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Chart Points: The weekly continuation chart took out the 2017 high at $3.945. Round number resistence at $4 is the next concern for the bulls. We are also operating under a triangle breakout to the upside, with counts in the $4.20’s. These apply to May futures until expiration. July contract posted the highest price since August 2017, now minor resistance at $4.04. Bollinger midline support is $3.94 1/4. RSI overbought at 87, so there is some Turnaround Tuesday risk. The Vp indicator leans bearish for today. December futures have a rising regression channel supoort at $4.05. The quants wuld be expected to sell it in the $4.22’s if given the opportunity.

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Soybeans

Soybean futures are trading 2 to 4 cents lower this morning. They saw weakness into the close on Monday, with the nearby contracts settling 7 to 7 3/4 cents lower. Soy meal was down $1.10/ton, with front-month soy oil 8 points in the red. Analysts are expecting to see a March crush number of 183.2 mbu in today’s USDA Fats & Oils crush report. Soy oil stocks are seen at 2.425 billion pounds for the end of February. Soybean export inspections during the week of 4/26 totaled 679,379 MT. That was 43.83% larger than the week prior and 22.53% above the same week last year. The Crop Progress report indicated that the US soybean crop was 5% planted on Sunday. That matches the average pace but is 4% slower than this time last year.

Soybean futures are trading 3 to 6 cents in the green at midday, following soy meal. Soy meal is up $12.40/ton, with front-month soy oil 30 points lower.

May 18 Soybeans are at $10.43 3/4, up 6 cents,
Jul 18 Soybeans are at $10.52 1/4, up 3 3/4 cents,
Aug 18 Soybeans are at $10.54 1/2, up 3 3/4 cents,
Sep 18 Soybeans are at $10.51, up 3 3/4 cents,
May 18 Soybean Meal is at $404.50, up $12.40
May 18 Soybean Oil is at $30.05, down $0.30

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Chart Points: Downtrend resistance is at $10.65 on the weekly continuation chart. The Bollinger midline support is $10.17 1/4 . These numbers still apply to May futures, Weekly stochastics are neutral. The 100-day moving average support on the July chart is $10.26 3/4 . Overhead trendline resistance is near $10.72. The November contract has lateral resistance at $10.60. regression channel support is $10.28. The 100-day moving average is down at $10.15. The upper Bollinger Band resistance held the market yesterday at $10.555.

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Chart Points: The weekly continuation chart shows an old high for resistance at $399.10. We picked off stops above that overnight. The 38.2% Fib retracement support is $358.60. These apply to May. July contract stochstics are bullish. Prices set a new life of contract high yesterday, but failed to maintain the traingle breakout. The measure move would be $48/topn if the breakout is sustained, Uptrend support is $377.10. The shooting star candlestick defines resistance at $403.60.

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Wheat

Wheat futures are 1 to 2 cents lower in the Chicago SRW  contract this morning but 4 to 5 cents lower in the KC and MPLS hard wheat futures. They posted 5 to 7 cent gains in the KC contracts, with nearby MPLS up 11 1/2 cents. Chicago SRW was up 12 to 17 cents in the front months on month-end profit taking in the May and net new buying for July. Preliminary open interest showed an overall increase of 9,563 contracts for Monday. The USDA reported 376,256 MT of wheat was inspected for export in the week that ended 4/26. That was down 41.57% from last week and 36.21% lower than this week in 2017. NASS reported the US winter wheat crop was 19% headed as of Sunday, lagging the average at 30%. They also showed condition ratings improving slightly to 33% gd/ex, with the Brugler500 up 2 points to 287. The spring wheat crop is still having trouble getting in the ground, as only 10% was reported planted through Sunday. The average is for 36% to be planted at this point.

Wheat futures are showing sharp gains on Tuesday, with SRW up 12 to 15 cents, and HRW 10 to 13 cents higher. MPLS is 6 to 7 1/4 cents in the green. The annual HRW wheat quality tour began today with reports so far showing much of the known drought stress in KS.

May 18 CBOT Wheat is at $5.27 1/2, up 15 cents,
May 18 KCBT Wheat is at $5.29, up 10 1/2 cents,
May 18 MGEX Wheat is at $6.25, up 7 1/4 cents

KCBT HRW WHEAT Chart Points: Downtrend resistance on the weekly continuation chart is at $5.255. Bollinger midline support is $4.77 3/4. These apply to May futures. May futures broke Bollinger midline resistance to the upside. There is a trendline at $5.30 as resistance. Stochastics are bullish for July futures. The main resistance is a downtrend line at $5.37. The upper Bollinger Band resistance is $5.47. Stochastics are overbought and looking for an excuse to sell off.

 

CBT SRW WHEAT Chart Points: The weekly continuation chart has lateral resistance at $5.06. Moving average support this week is $4.60 3/4 and applies to May futures. The May daily chart rallied past the 78.6% Fib retracement @ $5.02, with the 2018 high at $5.185 now expected resistance. July futures have 100-day moving average support at $4.75. Retracement resistance is $5.16 1/4.

MGE Chart Points: The weekly chart shows a bounce from the 100-week moving average support at $5.80 but a failure to crack the 40-week moving average resistance at $6.205. September futures bounced nicely from the 78.6% Fib retracement support @ $6.00 3/4. The 40-day average is now presumed overhead resistance at $6.19 3/4. RSI is bull friendly. Lower Bollinger Band support is $5.99.

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Cattle

Live cattle futures ended Monday with most contracts 90 cents to $1.95 lower. April expired at $123.75. Feeder cattle futures were down $1.85 to $2.05 on Monday in the face of some long liquidation (-2736 contracts). The CME feeder cattle index was up 68 cents on April 27 at $139.31. Wholesale boxed beef values were higher on Monday afternoon. Choice boxes were up $2.68 at $224.42, with Select boxes 47 cents higher at $204.79. The Ch/Se spread has widened to $19.63. Due to changes in grading, there are significant industry concerns about the value of this spread for decision making. Estimated FI cattle slaughter on Monday was 118,000 head, up 1,000 head from last week and 12,000 larger than the same week in 2017.

Live cattle futures are posting losses of 15 to 90 cents at midday. Feeder cattle futures are down $1.775 to $2.475 at the moment.

Jun 18 Cattle are at $105.150, down $0.950,
Aug 18 Cattle are at $104.100, down $0.425,
Oct 18 Cattle are at $107.300, down $0.150,
May 18 Feeder Cattle are at $138.325, down $1.850
Aug 18 Feeder Cattle are at $143.725, down $2.475
Sep 18 Feeder Cattle are at $144.600, down $1.775

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Cattle Chart Points: Weekly chart support is now $104.05 with June the lead month. A back adjustedweekly continuation chart (067, shown below and useful in expiration gap situations) puts the 18-weekmoving average resistance at $109.80. The June daily chart is in a rising regression channel, withsupport near $104.67 and resistance at $107.92. That is the 50% retracement. The main bull argumentfor June is that it is discounting a $20 drop in cash cattle. The bear argument is that a 45-week cycle low is due in July and the April 4 low was pretty early for that to be THE low. We still have a TMM problem. August futures resistance is the 40-day moving average at $105.62. Stochastics are neutral.

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Feeder Cattle Chart Points: The weekly chart shows a bounce from the 78.6% retracement and lower Bollinger Band. Resistance is $142.75 and $146.57, the 18 and 40-week moving averages respectively. Weekly chart RSI is neutral. The 100-week moving average resistance for the May chart is $143.50 and rejected yesterday’s rally attempt. A bearish divergence in the stochastics was left behind. Regression channel support for August futures is $144.85.

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Lean Hogs

Lean hog futures were mixed on Monday, with nearby May up 20 cents. The CME Lean Hog Index was up 52 cents from the previous day to $61.75 on April 26. The USDA pork carcass cutout value was up 12 cents at $68.73 this afternoon, with the loin and ham primals reported lower. The national base hog weighted average price was 14 cents higher at $58.35. The USDA estimated FI hog slaughter at 464,000 head on Monday. That is even with last week and 49,000 head above this week last year.

Lean hog futures are trading 75 cents to $1.15 higher on Tuesday. The CME Lean Hog Index was up 45 cents from the previous day to $62.20 on April 27.

May 18 Hogs are at $67.250, up $0.950,
Jun 18 Hogs are at $73.850, up $1.150
Jul 18 Hogs are at $76.625, up $0.750

Chart Points: The back adjusted and liquidity following weekly chart (067) shows support at $70.25. This applies to June futures. Weekly stochastics are neutral. June futures broke the 61.8% retracement support. The 78.6% Fib retracement support is $72.15. RSI and stochastics are oversold and trying to turn higher. The 61.8% Fib retracement support for July futures is $75.55.

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Cotton

Cotton futures are trading 4 to 39 points higher this morning, with most of the buying concentrated in July. They posted losses of 44 to 67 points to start the week. The Monday afternoon Crop Progress report showed that 12% of the US cotton crop was planted as of Sunday, a 2% advance from the week prior. The 5 year average is for 14% to be planted. Planting progress in TX is 15% complete, ahead of the average, with GA 10% planted. The Cotlook A index was up 25 points from the previous day on April 27 to 93.45 cents/lb. The Adjusted World Price was updated to 74.25 cents/lb this morning, 9 points above the previous week.

Cotton futures are mostly 44 to 83 points higher on Tuesday.

May 18 Cotton is at 85.3, up 62 points,
Jul 18 Cotton is at 84.67, up 83 points
Dec 18 Cotton is at 79.220, up 44 points

 

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Source:

Brugler Marketing & Management, LLC 

USDA 

NOAA

CFTC 

Merk Investor Relations

Pfizer Investor Relations  

MOMENTUM STRUCTURAL ANALYSIS 

Hedgeye 

-R.W.N. II

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