The weather market continues in beans with many suggesting it is not as hot or as threatening as it was yesterday? Fact is, we have had a dynamic market that can continue to be dynamic as summer can feature a statistical change that changes price structures long term. In terms of the current market traders do not yet know what they have in a bean crop so uncertainty exists everywhere. Users have been caught without coverage succumbing to the bearish rhetoric around the marketplace and facing prices that have not featured good retracements to accumulate usage coverage. It is a dangerous market with a first leg of 90 cents low to high in corn and in beans $1.45. The retracement in beans off highs was a fib 38.2%, but in the leader which is meal, it was 30% which suggests users tried to extend but most probably got little bought or priced.
Take a look at this morning recap to see what is around the market. Reason being, in normal markets information flow can be very valuable. If you are good you may, in fact, find you can attain a competitive edge. But in a weather market that has everyone’s attention because it has left traders in the lurch, intensity of market participants ratchets higher as everyone seeks reasons. Reasons to buy a break, or question the rally, or to reduce risks, or to evaluate supply and demand estimates, or whatever. Point is – everyone is on point! That makes information move very quickly around the marketplace so gaining that competitive edge is very difficult if not impossible because too many inputs are having an influence on the markets and you cannot easily sort out what is the one or even two that are determining trade activity and direction. But lets’ look at this excellent soy recap and see what traders are chewing on early this morning.
o NOAA released update one month temp and precip forecasting maps (see below) that are mostly benign and should be considered bearish.
• World Weather:
o U.S. Northern Plains and upper Midwest rainfall will be favorable for summer grain, oilseeds and sugarbeets
o Rain frequency and intensity in the lower eastern Midwest will decrease over the next two weeks offering improved crop weather for many areas
? The second week of the forecast, July 24-31, will be driest and warmest
? Rain totals of 0.75 to 1.75 inches will be possible in the lower Midwest over the next seven days
o Warm temperatures in the western Corn Belt will accelerate drying rates between rain events
o Rain developed in Iowa, Nebraska, Missouri and northeastern Kansas Wednesday with most amounts of 0.20 to 0.80 inch. However, local totals of 2.00 to 4.00 inches occurred in southwestern Iowa and northwestern Missouri with unofficial totals over 9.00 inches in northwestern Missouri
o A favorable mix of rain and sunshine with warm temperatures will impact the U.S. Midwest over the next two weeks, although the last week of July will be a little drier and warmer biased in southern parts of the region.
o Southern U.S. Plains will be dry during much of the coming week to ten days
o U.S. Delta will experience net drying over the week to ten days
? Rain will be needed a little later in the summer to protect production potentials
o U.S. southeastern states will also experience erratic rainfall during the next two weeks leading some areas into a little moisture stress
• In the news:
o NOPA June crush coming in at a new record for the month at 142.47 mb which was about 1 mb above trade expectations and compares to May crush at 148.42. Oil stocks were 1.574 bln lbs vs. 1.560 expectations and 1.578 in May. Meal exports were 597 tst vs. 551 in May.
o Malaysian palm oil closed -6 to 2,190 ringgit.
• Weekly soybean export sales totaled 553 tmt (46 old crop) which came in above expectations. The featured buyers were Japan (52 old and 55 new) while unknown cancelled -18 old crop and bought +403 new crop.
• Weekly meal export sales totaled 72 tmt (33 old) which was below market expectations. The featured buyers were Libya (22 old) and Ecuador (28 new) while unknown cancelled -40 old crop.
• Beans finished the session lower yesterday but managed to bounce 10 ½ cents off of the day’s low as crop uncertainty prevents us from breaking too deeply at this timing – we remain in a full-fledged weather market (with daily forecast shifts shaking traders in/out) and the trade needs to get a better handle on acres and yields before deciding which direction to move – for the short term we may try to consolidate and mark time.
• Oil share continues to plummet in fresh contract lows at 30.2% this is off from our June 1 peak at 37.2%.
• Board crush margins are on fire, last at $1.27/bushel August and $1.09 new crop.
• If this market can extend its rally into new highs, we have upside counts at $10.83 which is consistent with a challenge of the fall highs, followed by $11.43. The weekly chart took a small hit on the July expiration and could be working on a reversal lower against our the 2014 highs with a close below $10.43 ½ on SQ tomorrow.
• SQ-SX bull spread is trading lower to a 7 ¾ cent inverse.
• SMQ is trading into new highs for its rally, clearing our PriceCount area and fall highs – if we can hold this trade the next upside targets would be the weekly highs in the $400 area – support moves up to $355 for now.
• SMQ-SMZ is trading through the June highs, last at $13.6 – our fall and December highs on this spread range from $14-$18 where we should slow this rally down.
• Bean basis bids at the Gulf off 1 to +77, Decatur steady +40q.
Some good points were made about how dynamic this market can be which is probably in every commission house wire, but nonetheless suggest to traders – ratchet up your intensity.
Like it or not, the technician has an advantage in these markets because many of those systems that he follows have disciplines that rule his decision making. That mean emotions are less involved and that increases the percentages of making the right decisions. Sidle up to a good technician if you haven’t already.