OUTSIDE MARKETS: Gold is up $16.00 per ounce to $1994.70 as the dollar index hits a two year low. Crude oil is $43.04, up 43 cents per barrel. The dollar is weaker vs. the euro, but up against the JY.
WEATHER: The maps below reflect 90 day departures from average precipitation and temperature, in other words for the June-August growing season. The Southwest is in a drought, and has been. The Midwest shows a broad band from NE to OH of 50-75% of normal rainfall. Temps have been above normal for the Plains, the Northeast and only parts of the Midwest.
The latest updates call for 60% chance of a weak La Nina pattern this fall, extending into the winter. This will be more of an issue for Argentina (and to a lesser degree Brazil) due to the timing. The models do no currently see it extending into the US 2021 growing season.
CORN: Futures were higher on Sunday night, but only September (+2 ½) was up by the Monday close. Other contracts were down 1 ½ to 2 ¼ cents. Preliminary open interest was up 11,254 on the decline, suggesting some net new selling interest. There were no deliveries against September futures overnight. After the close, NASS reported that 12% of the corn crop was mature, up from 5% LW and 2 ppts ahead of average. The weekly Crop Progress report had 63% of the crop in the denting stage. The 5-yr average is 56%. Corn condition ratings scored a 357 on the Brugler500 index. That was the worst score of the new crop growing season, but still up 4 points yr/yr. Conditions in Iowa were down 13 points on the Brugler500. USDA’s Export Inspections report had YTD corn shipments at 1.640 bbu, compared to 1.857 bbu from the same week last year. Official Census numbers are higher.
Chart Points: Upper Bollinger Band resistance on the weekly continuation chart is $3.515. The 38.2% Fibonacci retracement of the drop from the 2019 high is $3.63. These apply to September futures. Weekly stochastics are still in neutral. The July high is lateral resistance @ $3.55 for September futures. The doji star from Monday is a potential bearish reversal signal. There is a downside chart gap to fill at $3.325. Keeping it open would make it a measuring gap. December futures have taken out 78.6% retracement resistance at $3.53 3/4. The next resistance is the 2/3 speedline from the January high, at $3.73. However, we have a short term trading cycle low (24-day) due on Friday. There is also a downside gap to fill at $3.455. Lateral resistance for March is $3.73 ¾. Red Dec (2021) has 2/3 speedline resistance @ $3.88, with a Fibonacci 1.618 expansion count at $3.94.
Corn Feed User Recommendations: You have cash corn ownership to November 1.
Corn Recommendations: 2019 Crop: Hedgers and Cash only sellers are 90% sold on 2019 production. ***Increase cash forward contract sales another 5% of production. 2020 Crop: You are 20% cash forward contracted on 2020 production. ***Increase cash forward contract sales another 5% of production. Hedgers have Dec 380/320 short strangles vs. 25% of production, with short Dec 320 puts vs. another 25% of production and short March 380 calls vs. 10%. The March call roll was not triggered on Monday.
SOYBEANS: Futures settled ¾ to 3 ¾ higher on Monday, in most cases within 2 cents of the intraday low. Meal was up $3.00/ton to support product value, but soy oil was down 43 points. Preliminary open interest rose 9,481 contracts. There were again 2 deliveries against September beans overnight. Soymeal futures ended the Monday session $2.80 to $3.00 higher. Soybean oil closed the day with 37 to 43 point losses. After the close, NASS reported 95% of soybeans were setting pods. The average is 93%. NASS saw 8% of soybeans dropping leaves which is even with the average. Crop conditions fell back 7 points on the Brugler500 index to 366. From heat and dryness, bean conditions in Iowa and Kansas were down 14 and 25 points respectively. From hurricane damage, bean conditions in Louisiana dropped 39 points. USDA will release the Fats and Oils report this afternoon. The average trade estimate is for 183.0 mbu of beans crushed in July, NOPA members crushed 173 mbu in July. Bean oil stocks are estimated at 2.125 billion lbs.
Chart Points: Futures have gapped above the January high at $9.49. Weekly MACD is still bullish. The 61.8% Fib retracement of the decline since March 2018 is $9.60 and applies to September futures. Bollinger midline support is $9.045 on the September daily chart. The overnight gap at $9.525 is a short term bear objective. The January high is lateral resistance at $9.825. The trend is your friend, and both MACD and parabolics are still bullish for November futures.
Rising regression channel resistance is $9.64 ¼. The gap from Monday was closed overnight. A 38.2% retracement of the rally since August 24 is support at $9.42. A 38.2% retracement of the entire move since August 10 would be $9.28. At least some quant buying would also be expected at the lower regression channel boundary ($9.32). A trading cycle low is due on 9/11, +/- three days.
Soybean Recommendations: 2019 Crop: Hedgers and cash only sellers are both 90% cash sold. —Hedgers bumped up old crop cash sales 5% to catch up with cash only sellers (8/31 @
$9.615). ***If Sept <$9.50, sell remaining old crop cash beans. 2020 Crop: Both hedgers and cash only sellers are forward contracted on 30% of expected 2020/21 production. ***Increase cash forward contract sales another 5% of production. Hedgers have short Nov 840 puts vs. 10% of production. ***Take profits on the short Nov 840 puts if < 1 cent premium. —You sold November 1000 calls vs. 20% of production (8/31 @ $.12 5/8). Current odds of expiring ITM are 24%.
Soy Meal: The weekly chart shows prices moving higher out of a Bollinger pinch. The BB midline support is $289.30 on the weekly. The 50% retracement is $307.60. Both apply to September futures. The 40-day moving average support for December futures is $297.40. Upper Bollinger Band resistance is $312.60.
Soy Meal Recommendations: You have cash meal coverage through October 1. The next trading cycle low is due on 9/9. Hedgers have Dec 300/320/280 3-way call spreads vs. 3 months of use. —You sold December 280 puts vs. 3 months of use (8/27 @ $1.40) to complete the 3-way call spread.
WHEAT: Futures were UNCH to ¾ higher in MPLS after Stats Canada showed slightly larger than expected Canadian wheat production. The crop is expected to be the second largest ever, trailing 2013/14. KC HRW was up 2 ¼ to 8 ¾, with Chicago SRW up 2 to 5 cents. The Crop Progress report said 69% of spring wheat was cut as of Sunday; the 5-year average is 77%. Marketing year to date wheat exports are outpacing the 2019/20 pace by 146,205 MT, via Export Inspections data.
KCBT HRW WHEAT Chart Points: Prices have rallied past the Bollinger midline resistance at $4.47 ¼. The upper BB resistance is $4.85 and applies to September. Weekly RSI is overbought, but not turning. September futures have 2/3 speedline resistance at $4.74. The 20-day stochastics are the highest they have been since March but have not rolled over. The 2/3 speedline resistance for December contract is $4.845. That stopped us yesterday. Rising regression channel support is $4.68. MACD is still bull friendly, with a rising ADX.
KC Wheat Recommendations: 2020 Crop: You are cash sold on 45% of production. SEP: No position recommended as we are in deliveries and volume is thin. DEC: —Hedgers sold December 500 calls vs. 20% of production (8/28 @ $.105).
CBT SRW WHEAT Chart Points: The upper Bollinger Band resistance is $5.585 on the weekly chart. Stochastics are overbought on the September daily chart. The previous high is lateral resistance at $5.51 ¾. Regression channel support is $5.40. Stochastics for December futures have rapidly become overbought. The upper Bollinger Band resistance is expected around $5.625 (it bends upward with the rally). We picked off stops above the July high, trading at the highest price since April. MACD is still bullish.
CBT Wheat Recommendations: 2020 Crop: You have forward contracted 50% of production. Hedgers are short December 580 calls vs. 45% of production. —You sold December 580 calls vs. another 20% of production (8/27 @ $.10 ¼).
MGE Chart Points: We’re switching coverage to December, as MPLS gets thin during deliveries. December futures have broken through the 1/3 speedline and the 100-day average. MACD does have a nice buy signal on a rising ADX. The 2/3 speedline resistance is up at $5.64. Lateral resistance from June is $5.54. Stochastics are pegged.
MGE Recommendations: 2020 Crop: No new crop sales made yet due to favorable chart action. ***Make a 10% new crop cash sale ONLY if December futures are likely to close <$5.37. Not triggered on Monday.
LIVE CATTLE: August futures went off the board at $104.50. The rest of the contracts at the Merc were up 35 to 80 cents. Cash sales have yet to establish for the week. Wholesale boxed beef prices were mixed on Monday afternoon, tightening the Chc/Sel spread to $12.63. Choice boxes dropped $1.45 to $227.95 cwt. Select boxes were 46 cents higher. Choice ribs were quoted $372.64, and loins were $328.36. USDA estimated FI cattle slaughter at 119,000 head for Monday. That is 2k head higher wk/wk.
Cattle Chart Points: Resistance on the weekly continuation chart is the 61.8% retracement at $109.95. MACD remains bullish. August futures expire today. The October futures broke out of their rising regression channel. MACD has a sell signal on a high ADX. The 1/3 speedline is potential support at $104.60. Stochastics are oversold. December futures also show an MACD sell signal. The 40-day moving average was broken. The 1/3 speedline support is $107.40. Stochastics are now into oversold territory.
Cattle Recommendations: OCT: Hedgers have short October 90 puts vs. 50% of expected marketings. —You added long October 106 puts vs. 100% of expected marketings (8/27 @ $2.65). —You sold October 114 calls vs. 100% of marketings (8/27 @ $.27). DEC: Hedgers have Dec 108/118/106 3-way put spreads vs. 50% of marketings. —You sold Dec 118 calls vs. 100% of marketings for the period (8/27 @ $.82). —You rolled the long Dec 112 puts (8/31 @ $5.70) to the Dec 108 strike (8/31 @ $3.62), taking some hedge gains off the table while maintaining downside coverage.
FEEDER CATTLE: Higher cattle and lower corn left feeder futures 27 to 77 cents higher on the day. The CME Feeder Cattle Index for August 28 was down 57 cents to $140.99.
Chart Points: Weekly stochastics have a sell signal. Bollinger midline support is $136.32 and applies to September futures. September futures are bending lower out of a Bollinger pinch. The 100-day moving average support is $136.90. Stochastics are oversold but not yet turning. The 1/3 speedline support is being tested at $140.87. November futures gapped below the 1/3 speedline support yesterday. It is now overhead resistance at $142.12. There is an overhead gap to fill at $144.97.
Feeder Cattle Recommendations:
Feeder sellers: —Your short August 124 puts vs. 100% of expected sales expired worthless as planned (8/27). Hedgers have September 146/150 put fence spreads or risk reversals vs. 100% of marketings. —You sold November 150 calls vs. 100% of marketings (8/28 @ $1.35).
Feedlots: —Your short August 146 calls and short Aug 124 puts vs. 100% of expected placements expired worthless as planned (8/27). You have September 154/136 short strangles vs. 100% of September placements. —You sold September 136 puts vs. 100% of marketings (8/26 @ $.525). —You exited the long September 146 calls for salvage value (8/28 @ $.45).
CATTLE CRUSH SPREADS: No current positions.
LEAN HOGS: Futures settled $.45 lower to $.70 higher on Monday, with the late 2021 contracts in the black as they were able to assume low prices will discourage expansion. The August 27 CME Lean Hog Index was down by 7 cents to $57.05. USDA’s National Average Base Hog price for Monday afternoon was $43 flat, $0.09 higher. USDA’s National Pork Carcass Cutout value was quoted at $72.62 in the afternoon update, up $1.23. The primals were mostly higher, but butts fell 43 cents to $83.37 cwt. USDA estimated the start to the week’s hog slaughter under federal inspection at 486,000 head. That is 17,000 head above LW but not comparable to the same week last year because of the holiday.
Chart Points: The weekly continuation chart shows uptrend support at $48 and downtrend resistance at $61.07. October futures have 61.8% Fib retracement resistance @ $56.62. Prices are testing BB midline support @ $53.55. December futures’ lateral resistance is the 61.8% Fib retracement at $56.35, followed by the 78.6% at $58.32. Bollinger midline support is $54.85.
Hog Recommendations and active positions: OCT: Hedgers have October 60/38 short strangles vs. 100% of October marketings. —You sold Oct 60 calls vs. 100% of marketings (8/28 @ $.77). Odds of those being in the money are currently 18%. DEC: No current positions.
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