Weekend Ag Update
USDA report on Tuesday, May 12th. We will have estimates out beforehand.
It was a positive week for most agricultural commodities as it seems we have chewed through the peak panic and are getting more clarity on how and when we will get some sort of normalcy back in our lives. In our daily reports, weekly interviews, and discussions with clients, we have been emphasizing that the market is a forward looking mechanism and just as the market was pricing in bad news ahead of time, it will also price in good news ahead of time. In between the bad news and good news is often a lull period, which is arguably the most important. We have seen that lull period over the last two weeks, where the rate of bad news slow. In this environment, less bad news is good news, no news is good news (it would be the opposite in a rallying market), and good news is great news. Below is a quick breakdown of our thoughts on some of the Ag markets. If you want to know our thoughts on any markets not covered in today’s report, let us know and we will let you know before we open on Sunday night!
Corn: We have been openly pessimistic on corn prices for the better part of the last month, but we are starting to see the shifting news cycle shift price action, specifically in corn which is attempting to form a near term bottom. The market has survived multiple attacks recently; ethanol plants being shut down, trade tensions rising, good planting progress, etc., etc. The bad news is widely known, which means it is largely priced in. This past week we started to hear of ethanol plants coming back on, China buying corn, and potential weather concerns arising. Add in the fact that funds are short roughly 190,000 contracts and that puts the risk to the upside, in our opinion. Our new Blue Line Ag Alerts program put out a longer term, limited risk, bullish position in corn last Monday (May 4th). Contact us more information about Blue Line Ag Alerts!
Technical Outlook: corn futures rallied right into the middle of our first resistance pocket, we have had that defined as 320-325. Though we are optimistic on prices over the intermediate term, this was a spot for us to reduce exposure with clients. It is that time of year where we will likely see gaps (up or down) on Sunday nights. There was some premium added to prices in the back half of the week as frost concerns emerged. If weekend weather is better than expected, we will likely open lower and we would be able to put the positions we reduced back on at better prices. Consecutive closes above our resistance pockets could spark a bigger relief rally.
Previous Session Bias: Bullish/Neutral
Resistance: 320-325***, 330-333****, 343 ¼-344 ¾**
Pivot: 316-317 ¾
Support: 308 ¼-310*** 298 ¾-301 ¼**
Soybeans: Soybeans managed to rally in the back half of the week as the weather concerns developed and China/Unknown was seen in export data. There has been concerns that the blame of coronavirus will rise trade tensions an diminish any progress done on the trade deal, though a real concern it has yet to be realized. Our new Blue Line Ag Alerts program put out a short term, limited risk, bullish option position in soybeans last Monday (May 4th), we exited that position for a profit on Friday (May 8th). Contact us more information about Blue Line Ag Alerts!
Technical Outlook: The Market tested and held our pivot pocket multiple times in the first half of the week, ultimately leading to a springboard reaction higher to round out the week. The market came within a stone’s throw of our 4-star resistance pocket, we have had that defined as 857-861 ¼. In yesterday’s report we wrote: “If you had bought support earlier this week, you may consider reducing against resistance ahead of the weekend.”. We remain cautiously optimistic, with a slightly bullish tilt in our bias.
Previous Session Bias: Neutral/Bullish
Resistance: 857-861 ¼****, 871 ¼-875**
Support: 818-821***, 808 ¼***, 791**
Live Cattle: As mentioned in the intro of this article (and in previous reports), the news cycle has played an important role in recent price action. Less bad news is good news, no news is good news, and good news is great news. We saw kills pick up last week, plans for plants to come back online, and a stronger cash trade. Sure, one day or one week doesn’t make a trend, but this is a FUTUREs market. If you wait for all the good news to be in front of you, you have probably missed the move. Imagine if you waited for all the bad news to enter a short position. We are still optimistic on live cattle prices and continue to believe the tides have and will continue to turn, for the better.
Technical Outlook: August live cattle sprang higher in the back half of the week, finishing in the middle of our 4-star resistance pocket, 99.85-100.975. This pocket is extremely significant and may prove to be a barrier on the first test. This pocket represents support from last August (Tyson plant fire), support in early March, the breakdown point at the end of March, resistance on March 25th, and the 50% retracement from the contract highs to contract lows. If we do stall out here, we could see Thursday’s gap filled, near 95.45. If the bulls can achieve consecutive closes above here, we could see an extension towards 104.40-106.55.
Feel free to call/text/email, Oliver with any questions. Oliver@BlueLineFutures.com and 312-837-3938
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