Wheat

Corn, wheat and soybean futures started off the week with a bang and posted big gains Sunday night. Unfortunately for the corn and beans, the Sunday night rally marked the high water mark for the week. For the wheat market, on the other hand, we saw gains throughout the week. The Chicago wheat continues to widen the spread versus Kansas City, and for the moment at least, is our upside leader.

There wasn’t a great deal of fresh news this week. We did have some early optimism about trade with China and hopes the Chinese really would by $40 to 50 billion in ag products. We still don’t have a timeline on these purchases, or a signed deal for that matter, but it does seem we are getting closer to something. Corn and soybean yield reports are coming in more rapidly now, though the results are mixed at best. It seems the yields are generally skewed lower than year ago levels, so we will see what the U.S. Department of Agriculture does in the November and January supply and demand reports.

An interesting development this week is that Dollar Index is starting to slip below some major long-term support. The Dollar Index has been working on the current move higher since March of 2018 and is now falling below trend line support. We spent the entire week below the 50-day moving average, which we haven’t done for months. Since things like corn and gold have a good inverse relationship with the dollar, it is an important market to watch over the long term. The Federal Reserve is back to buying Treasury bills to increase the money supply, so that in itself could give the dollar a weaker bias.

On the charts, the wheat obviously looks the best since it keeps making higher highs. The $4.70 area looks like a legitimate upside target for the December KW. Our large supplies are a little bothersome when looking at that objective, but the funds are getting long, and money flow can be the most important fundamental.

Corn struggled a bit this week. Basically, the December contract died right at the top end of our upward trading channel Sunday night. The bottom end of the channel will be at the $3.87 area early in the week, and that should prove to be very good support. Eventually, we will see the December contract reach the $4.21 to $4.28 area.

November soybeans are now making a test of the June highs. The market has reached an overbought condition and needs a bit of a correction. It may end up correcting by going sideways. If the market can move to $9.50, the next upside objective would be the contract high of $10.15. The November contract may run out of time for that, but the same idea would apply to the January contract. The threat of another yield cut is quite real and could make ending stocks uncomfortably tight. This market could get fun.

The cattle market is already fun, although we didn’t finish the week very well. We had $108 to $109 cash trade in Texas and Kansas, which wasn’t helpful and really pressured the front end of the live cattle on Friday. The feeder futures stalled out Monday, even though that Feeder Index keeps climbing and the futures are under the Index. There is still some time for things to go wrong, but with the Index on the verge of making new highs for the year, it still looks like the momentum is up in the cash market.

For now, I am looking at breaks as corrective in nature. The resistance is strong at $115 in the December live cattle, but clearing that resistance would suggest we will see a move up to $124. The next upside objective for the November feeders is the $149 area. A move above that resistance and $160 will be in play.

Schwieterman, Inc. is a full service commodity brokerage firm. If you would like more information on commodity markets or our brokerage services, contact Eric Relph at 800-272-9131 or www.upthelimit.com.

Note: This material has been prepared by a sales or trading employee or agent of Schwieterman, Inc. and is, or is in the nature of, a solicitation. This material is not a research report prepared by Schwieterman, Inc. Research Department.

Recommended for you