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DAILY GRAINS COMMENTARY
Friday December 19, 2014
312-462-4533
DAILY SOY COMPLEX COMMENTARY
12/19/14
Tech bounce but with spreads trading down, upside is limited
OVERNIGHT CHANGES THROUGH 6:05 AM (CT):
SOY BEANS -5.0, BEAN OIL +0.0, SOYMEAL -2.1
OVERNIGHT DEVELOPMENTS: March soybeans were trading 7 1/2 cents lower near 7:00 cst. China
soybean futures were up 0.4% overnight and Malaysia palm oil futures were up 0.2%. Global equity markets
were higher across the board, following a strong showing in the US, a measure of stability in Russia and
modest rebound in crude oil. The latest Bank of Japan policy meeting kept rates unchanged, but raised their
economic assessment, and that lifted the Nikkei by 2.3%. There also appeared support in Asia coming off the
patient stance on interest rates from this week's Federal Reserve meeting. China's Shanghai Composite
registered a bullish outside day reversal and rallied into highest level since November 2010. European equity
markets began to turn into the red following weaker stock specific headlines from Air-France, Seadrill and
Roche, as well as weakness in the Italian banking sector. However, weakness was limited in the wake of
upbeat German Gfk consumer confidence data that pushed to its highest level since December 2006. US
equity markets saw more upside follow through from sharp gains Thursday, with the March S&P 500 posting a
new contract high in the process. The US economic calendar is rather light in the coming session, but
quadruple witching expiration could inject a measure of volatility.
NEAR-TERM MARKET FUNDAMENTALS: It will not take much in the way of commercial selling to turn the
trend down. Technical support held for soybeans and soymeal yesterday, which brought in some fresh buying
but purely from a technical basis. Both markets appear to be stuck in a range until more evidence of US
demand destruction is seen and fresh supplies are coming out of South America. The weather continues to be
very favorable for South American production. It looks as though port workers in Argentina have begun a strike
which is a common occurrence, and shipments of soymeal may face delays until the issues are sorted out. This
development may be why soymeal spreads rebounded to trade higher yesterday and as a result, the soybean
and soymeal flat price found some solid buyers. Soybean spreads continue to be on the defensive as the
soybean basis leaks lower in the Gulf and in the River market. Export sales aren't offering much direction for
the trade, but soybean sales do seem to be slowing down.
Weekly export sales for soybeans came in at 696,000 tonnes for the current marketing year and 350,000
tonnes for the next marketing year for a total of 1,046,000 tonnes. As of December 11th, cumulative soybean
sales stand at 85.9% of the USDA forecast for the 2014/2015 (current) marketing year versus a 5-year average
of 78.7%. Sales of just 179,000 tonnes are needed each week to reach the USDA forecast. Soymeal sales
came in at 146,800 tonnes. Cumulative sales stand at 60.3% of the USDA forecast for the 2014/2015 (current)
marketing year versus a 5-year average of 53.2%. Sales of 110,000 tonnes are needed each week to reach the
USDA forecast. Soybean oil sales came in at 38,800 tonnes. Sales of 13,000 tonnes are needed each week to
reach the USDA forecast. Exporters also reported a sale of 1.5 million tonnes of US soybeans for the 2015/16
season to China.
The USDA baseline projections for the next ten years were released yesterday and for the 2015/16 season,
planted area was estimated at 84 million acres, production was at 3.820 billion bushels and ending stocks were
at 519 million bushels. While the market may pay little attention to these estimates at the moment, long-term it
still looks as though 2015 will see another year of higher soybean acreage and risk of a year-over-year build in
US inventories. This will be a negative influence in the first quarter of 2015. World ending stocks are expected
to exceed the previous record high by a whopping 28.4% so once the demand is saturated, there will still be
aggressive supply of soybeans to move on the world market; even if China demand is stronger than expected.
TODAY'S MARKET IDEAS:
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Weather remains near ideal for South America which will keep production expectations high. Brazil exports
could reach nearly 50 million tonnes next year if the crop is good, up from 30 million just three years ago.
Soybean spreads continue to collapse, which leaves the flat price market vulnerable to more downside going
forward. March Soybean selling resistance is at 1040 and 1052 while support comes in at 1005 1/4, 985 1/4,
927 and 856 1/2.
NEW RECOMMENDATIONS:
Sell March meal at 358.30 with an objective of 325.60. Risk to 365.60.
PREVIOUS RECOMMENDATIONS:
1) Short July soybean 1040 put and long 5 July 880 puts for even money with an objective on the spread of
+60 cents. Risk a total of 14 cents on the spread. 2) Long July soybean 1020/880 bear put spread from 36
cents with an objective of 85. Risk to 21.
SOYBEAN COMPLEX TECHNICAL OUTLOOK:
Note: Technical commentary is based solely on statistical indicators and does not necessarily correspond to any fundamental analysis that
may appear elsewhere in this report.
SOYBEANS (JAN) 12/19/2014: Momentum studies trending lower at mid-range should accelerate a move
lower if support levels are taken out. The market now above the 18-day moving average suggests the
intermediate-term trend has turned up. The close over the pivot swing is a somewhat positive setup. The next
downside objective is now at 1017 1/2. The next area of resistance is around 1043 and 1049 1/2, while 1st
support hits today at 1027 and below there at 1017 1/2.
SOYBEAN OIL (JAN) 12/19/2014: The crossover up in the daily stochastics is a bullish signal. Momentum
studies are trending higher from mid-range, which should support a move higher if resistance levels are
penetrated. The market's short-term trend is negative as the close remains below the 9-day moving average.
The close over the pivot swing is a somewhat positive setup. The near-term upside target is at 32.40. The next
area of resistance is around 32.14 and 32.40, while 1st support hits today at 31.64 and below there at 31.41.
SOYMEAL (JAN) 12/19/2014: The market now above the 40-day moving average suggests the longer-term
trend has turned up. Stochastics trending lower at midrange will tend to reinforce a move lower especially if
support levels are taken out. The close below the 9-day moving average is a negative short-term indicator for
trend. A positive setup occurred with the close over the 1st swing resistance. The next downside target is
354.8. The next area of resistance is around 370.0 and 373.7, while 1st support hits today at 360.6 and below
there at 354.8.
DAILY CORN COMMENTARY
12/19/14
Bullish chart, but rally slowing exports and could increase acres
OVERNIGHT CHANGES THROUGH 6:05 AM (CT):
CORN -4.6
OVERNIGHT DEVELOPMENTS: March corn was trading down 5 cents
near 7:00 cst. Outside market forces look supportive.
NEAR-TERM MARKET FUNDAMENTALS: March Corn saw an upside breakout from a bull flag yesterday, as
a stronger wheat market continues to build energy in corn. The technical foundation of the corn market is far
more bullish than the fundamentals despite strong ethanol demand. Export sales were very disappointing and
when put into context against the rally in the market, it's quite telling that sales may continue to slow if we move
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higher from here. Net weekly export sales came in at 693,500 tonnes for the current marketing year and 5,000
tonnes for the next marketing year for a total of 698,500 tonnes. As of December 11th, cumulative corn sales
stand at 54.9% of the USDA forecast for the 2014/2015 (current) marketing year versus a 5-year average of
57.5%. Sales of 531,000 tonnes are needed each week to reach the USDA forecast. Exporters reported a sale
of 126,000 tonnes of US corn to an unknown destination while South Korea bought 69,000 tonnes of optional
origin corn.
The USDA baseline projections for the next ten years were released on Thursday and for the 2015/16 season,
planted area was estimated at 88 million acres, production was at 13.445 billion bushels and ending stocks
were at 1.733 billion bushels. Some of the corn market's short-term momentum indicators have pushed into
overbought levels.
TODAY'S MARKET IDEAS:
The breakout from the bull flag yesterday is a bullish technical development, and upside objectives remain
unchanged at 416, 420 and 422 1/4 while support comes in at and 401 1/2. If soybeans and wheat continue to
falter, it may be difficult to find new buyers. Uptrend channel support is all the way back at 390.
NEW RECOMMENDATIONS:
None.
PREVIOUS RECOMMENDATIONS:
1) Long December 2015 corn 380 put from 27 cents, long Dec 2015 corn futures from $3.99 3/4 and short
December 2015 corn 430 calls from 26 cents. Continue to hold. 2) Bought back January 390 put for a 6 1/2
cent gain and suggest traders remain long 3 of the February 360 corn puts from 6 cents each. Exit one put at 8
3/4 cents.
CORN TECHNICAL OUTLOOK:
Note: Technical commentary is based solely on statistical indicators and does not necessarily correspond to any fundamental analysis that
may appear elsewhere in this report.
CORN (MAR) 12/19/2014: Rising stochastics at overbought levels warrant some caution for bulls. The market's
short-term trend is positive on the close above the 9-day moving average. It is a mildly bullish indicator that the
market closed over the pivot swing number. The near-term upside target is at 417 3/4. With a reading over 70,
the 9-day RSI is approaching overbought levels. The next area of resistance is around 414 1/2 and 417 3/4,
while 1st support hits today at 407 1/2 and below there at 403 3/4.
DAILY WHEAT COMMENTARY
12/19/14
Bearish close; buy rumor, sell fact; sellers turning active
OVERNIGHT CHANGES THROUGH 6:05 AM (CT):
WHEAT -17.2
OVERNIGHT DEVELOPMENTS: March wheat was down 21 1/2 cents near 7:00 cst. March KC Wheat was
down 16 1/2 cents. Outside market forces look slightly supportive.
NEAR-TERM MARKET FUNDAMENTALS: Ideas that buyers of Russia wheat can easily find a replacement if
sales are cancelled sparked aggressive selling overnight. The CME needed to halt trading at one point after
prices fell 1.6% in just one second. Russia grain exporters stopped buying grain in the domestic market and
"buy the rumor, sell the fact" selling emerged to pressure. March Wheat closed higher yesterday, but finished
21 3/4 cents below the highs of the day. The close back under 662 3/4 on the session leaves the appearance
that a short-term peak may be in place. Supportive factors remain unchanged as Russian attempts to slow their
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export pace given their collapsing economy. World supplies remain abundant as the Southern Hemisphere
harvest proceeds and the Argentina Ag Minister raised their production forecast to 13.2 million tonnes vs. 12
million previously. Poor weather earlier in the growing season may have caused some quality issues, but it
looks as though yields are better than expected.
Weekly export sales came in at 476,300 tonnes for the current marketing year and 33,200 tonnes for the next
marketing year for a total of 509,500 tonnes. As of December 11th, cumulative wheat sales stand at 70.9% of
the USDA forecast for the 2014/2015 (current) marketing year versus a 5-year average of 69.0%. Sales of
298,000 tonnes are needed each week to reach the USDA forecast. Exporters also reported a sale of 89,262
tonnes of US hard red wheat to Mexico. The EU cleared 514,000 tonnes of soft wheat for export this week
taking their total so far this marketing year to 13.6 million tonnes. Europe will continue to see a strong pace of
sales as Russia slows their exports.
The USDA baseline projections for the next ten years were released on Thursday and for the 2015/16 season,
planted area was estimated at 56 million acres, production was at 2.155 billion bushels and ending stocks were
at 700 million bushels. Using a similar production forecast, the carryout could be closer to 800 million bushels.
TODAY'S MARKET IDEAS:
Follow-through selling after the weak close yesterday suggests a significant top is in place. Selling resistance
for March wheat is at 662 3/4 with 628 and 593 1/2 as key support levels. Consider buying the March 625/590
bear put spread for 11 cents.
NEW RECOMMENDATIONS:
None.
PREVIOUS RECOMMENDATIONS:
None.
WHEAT TECHNICAL OUTLOOK:
Note: Technical commentary is based solely on statistical indicators and does not necessarily correspond to any fundamental analysis that
may appear elsewhere in this report.
WHEAT (MAR) 12/19/2014: Rising stochastics at overbought levels warrant some caution for bulls. The
market's short-term trend is positive on the close above the 9-day moving average. The close over the pivot
swing is a somewhat positive setup. The near-term upside objective is at 689 1/2. With a reading over 70, the
9-day RSI is approaching overbought levels. The next area of resistance is around 670 3/4 and 689 1/2, while
1st support hits today at 639 3/4 and below there at 627 1/4.
KC WHEAT (MAR) 12/19/2014: Studies are showing positive momentum but are now in overbought territory,
so some caution is warranted. The market's short-term trend is positive on the close above the 9-day moving
average. The market has a slightly positive tilt with the close over the swing pivot. The next upside target is 715
3/4. With a reading over 70, the 9-day RSI is approaching overbought levels. The next area of resistance is
around 697 3/4 and 715 3/4, while 1st support hits today at 669 3/4 and below there at 659 1/2.
MINN WHEAT (MAR) 12/19/2014: Daily stochastics have risen into overbought territory which will tend to
support reversal action if it occurs. A positive signal for trend short-term was given on a close over the 9-bar
moving average. The market has a slightly positive tilt with the close over the swing pivot. The next upside
objective is 689 1/2. The market is approaching overbought levels with an RSI over 70. The next area of
resistance is around 673 1/2 and 689 1/2, while 1st support hits today at 648 1/2 and below there at 639 1/4.
RICE (JAN) 12/19/2014: Momentum studies are still bearish but are now at oversold levels and will tend to
support reversal action if it occurs. The market's close below the 9-day moving average is an indication the
short-term trend remains negative. It is a slightly negative indicator that the close was under the swing pivot.
The next downside target is 12.018. The next area of resistance is around 12.150 and 12.177, while 1st
support hits today at 12.070 and below there at 12.018.
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DAILY TECHNICAL STATISTICS
CLOSE
9 DAY
RSI
14 DAY
RSI
14 DAY
SLOW
STOCH D
14 DAY
SLOW
STOCH K
4 DAY
M AVG
9 DAY
M AVG
18 DAY
M AVG
45 DAY
M AVG
60 DAY
M AVG
GRAIN COMPLEX
CNAH5
411
CNAK5
419 1/2
SSAF5
1035
SSAH5
1043 1/4
SMAF5
365.3
BOAF5
31.89
WHAH5
655 1/4
WHAK5
656 3/4
RCAF5
12.110
KWAH5
683 3/4
MWAH5
661
OTAH5
316 1/4
70.53
71.05
52.20
52.99
50.93
44.62
82.78
81.99
45.08
76.69
77.65
53.59
66.01
66.28
52.38
52.90
51.72
44.96
77.90
77.12
45.74
71.66
72.56
46.91
83.16
83.22
64.99
65.73
44.54
33.31
83.54
82.66
35.59
67.56
71.28
54.55
87.62
88.04
64.30
65.55
42.98
36.03
85.00
84.92
29.27
75.45
77.35
65.41
408.44
416.75
1031.25
1038.94
361.65
31.93
636.50
638.75
12.18
666.75
646.88
314.75
402.11
410.44
1037.72
1044.67
366.62
31.96
612.83
615.61
12.20
645.28
628.67
313.47
394.69
403.14
1030.26
1036.93
365.44
32.22
597.07
601.47
12.21
640.36
622.24
311.36
386.11
394.74
1021.61
1028.01
360.50
32.62
563.58
569.61
12.28
615.08
598.10
326.52
376.27
384.93
1001.10
1007.99
346.99
32.72
548.63
555.09
12.42
605.30
589.03
326.55
Calculations based on previous session. Data collected 12/18/2014
Data sources can & do produce bad ticks. Verify before use.
DAILY SWING STATISTICS
Contract
GRAIN COMPLEX
CNAH5
Corn
CNAK5
Corn
SSAF5
Soybeans
SSAH5
Soybeans
SMAF5
Soymeal
BOAF5
Soybean Oil
WHAH5
Wheat
WHAK5
Wheat
RCAF5
Rice
KWAH5
KC Wheat
MWAH5
MINN Wheat
OTAH5
Oats
Support 2
Support 1
Pivot
Resist 1
Resist 2
403 3/4
412 1/2
1017 1/2
1025 1/4
354.7
31.40
627
631
12.017
659 1/2
639
313 3/4
407 1/2
416
1027
1035
360.5
31.64
639 1/2
642 1/2
12.070
669 1/2
648 1/2
315
410 3/4
419 1/4
1033 1/2
1042
364.2
31.90
658 1/4
659 1/2
12.097
687 3/4
664 1/4
316 1/2
414 1/2
423
1043
1051 1/2
370.0
32.14
671
671
12.150
698
673 1/2
317 1/2
417 3/4
426
1049 1/2
1058 3/4
373.7
32.40
689 1/2
688
12.177
716
689 1/2
319 1/4
Calculations based on previous session. Data collected 12/18/2014
Data sources can & do produce bad ticks. Verify before use.
***This report includes information from sources believed to be reliable and accurate as of the date of this publication, but no independent
verification has been made and we do not guarantee its accuracy or completeness. Opinions expressed are subject to change without
notice. This report should not be construed as a request to engage in any transaction involving the purchase or sale of a futures contract
and/or commodity option thereon. The risk of loss in trading futures contracts or commodity options can be substantial, and investors
should carefully consider the inherent risks of such an investment in light of their financial condition. Any reproduction or retransmission of
this report without the express written consent of Stratis Financial is strictly prohibited. Violators are subject to a $15,000 fine per violation.
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