DTN Plains, Prairies Opening Comments
If vegetable oil market bulls were looking for an excuse to go bargain hunting following the profit taking of the past week, strong energy prices look like they may be enough.
DTN Plains, Prairies Opening Comments
GENERAL COMMENTS:
If vegetable oil market bulls were looking for an excuse to go bargain hunting following the profit taking of the past week, strong energy prices look like they may be enough. Word last week that President Trump had given Russia until Aug. 8 to reach a ceasefire with Ukraine was taken with a grain of salt at the time, but with the deadline fast approaching, energy markets appear to be taking it more seriously. Soybean oil and canola are benefitting the most following Tuesday’s selloff. In more general soybean complex news, much above-normal temperatures forecast for mid-August are not what producers want to see, especially in areas that have missed heavy rains. Corn and wheat are mixed after setting new contract lows yet again overnight as large production expectations continue to weigh.
OUTSIDE MARKETS:
Treasury markets are lower following the sharp rally seen since the weak payroll report as traders assess the impact of potential gains in energy markets on inflation if Trump follows through on threats against Russia. The U.S. 10-year note is at 4.24%.
The U.S. dollar is lower, extending the losses seen following a sharp break on the weak labor market news and the resulting decline in interest rates. The head-and-shoulders bottom formation remains intact with the pullback testing support at the neckline (with it holding so far). That is normal technical action and is likely to attract buyers with the formation having a target of roughly 101.330. If support fails, the five-day surge seen last week would present as a violent bear market correction with new lows expected. The Sept U.S. dollar is .236 lower at 98.345.
Equity markets are quietly higher, consolidating after the recent volatility amid quarterly earnings reports.
Energy markets are higher as bargain hunting kicks in ahead of Trump’s deadline for a ceasefire between Russia and Ukraine. It’s unclear if secondary tariffs on Russian energy purchasing countries would have any impact, but it appears to be supporting values after the recent selloff. September crude oil is $1.10 per barrel higher at $66.26.
The Sept Canadian dollar is up .00185 at $.72880. The Brazilian real is up .00015 at .18060. December gold is down $16.40 per ounce at $3418.30.
OILSEEDS:
Canola is higher, recovering some of the losses seen on the close Tuesday. Strengths in soybean oil and energy markets are helping with that as discussed in the general comments. Technically speaking, the market is still presenting as having completed a bull market correction with buy signals triggered on the charts. A close over the 25-day moving average is needed again following the recent retreat to the 100-day moving average with a close over the July 18 high of $712.80/mt needed to confirm the signal. November canola is $4.80 higher at $677.00/mt.
Palm oil is lower in reaction to Tuesday’s reversal lower in soybean oil. The September contract is down .59%.
Soybean oil is higher on bargain hunting and energy strength as buyers use the profit taking selloff as an opportunity. A test of resistance at the October 2023 high of 58.07 remains as a goal for the bulls. Technically speaking, the breakaway gap that was left on the daily and weekly continuation charts in mid-June suggests a leg up from the saucer bottom that’s been years in the making remains as the primary technical influence.
European rapeseed is quietly lower, still trading within its recent range. November rapeseed is down 1.25 euros at 474.25 euros per mt.
Soybeans are quietly higher, recouping Tuesday’s losses following a reversal lower on the day. Concerns over building heat for August are growing, likely limiting downside potential for now. A break below $10/bushel support Wednesday on the confirmation of increased tension with China resulted in little follow through selling which may be inspiring short covering. The StoneX yield estimate may turn out to be peak yield optimism with supply concerns remaining considering export sales running barely behind last year’s pace (despite China’s absence) and record crush expected.
WHEAT:
Wheat markets are mixed, setting new contract lows yet again overnight. Until something inspires funds to give up their bearish bias, significant gains may be hard to come by. Friday’s COT report confirmed that between Chicago and Kansas wheat markets, managed money traders had been adding to their short positions again ahead of the July 29 cutoff. They were net short 112,604 contracts or 563 million bushels (mb). Short covering by this group is likely the best hope for any meaningful rally.
CORN:
Corn is only quietly lower following a weak close Tuesday on the StoneX yield estimate. Technically speaking, the retreat from both the 25-day moving average and the gap down from July 7 was a bearish sign. The Key reversal from July 14, which left a divergence bottom was negated with a close below on Monday ahead of what was expected to be a bearish estimate from StoneX. Regarding market participants, Friday’s COT report confirmed that managed money traders were light sellers amid the pollination debate, taking them to 181,185 contracts or 906 mb net short. A covering event from this group would be expected to boost prices, should yield concerns eventually inspire it.
For greater detail on factors impacting soybean, wheat and corn markets — see DTN’s “Before the Bell” comments released shortly after 8 a.m. CDT.