Technically Speaking
Darin Newsom DTN Senior Analyst

Sunday 07/13/14

Grain Markets: Weekly Analysis

Source: DTN

Corn: The DTN National Corn Index (NCI.X, national average cash price) closed at $3.60, down 31.00cts for the week. This is the lowest weekly close for the NCI.X since $3.74 the week of August 23, 2010. National average basis (NCI.X - September futures) was calculated at 18cts under Friday evening, continuing to run below the 5-year average of 15cts over. The combination of weak national average basis while the futures market trades in the lower 17% of the 5-year price distribution range reflects a continued bearish old-crop supply and demand situation. Technically the NCI.X is in a pocket of old support between $3.10 and $3.80 set from July 2009 through August 2010.

New-crop Corn: The December contract closed 30.50cts lower. The secondary (intermediate-term) trend is down. The contract posted a new low of $3.82 1/2 before closing for the week near that low at $3.84 3/4. This price puts the December contract in the lower 17% of the market's 5-year price distribution range. Weekly stochastics are in single digits, well below the oversold level of 20%, though this has not sparked buying interest. The new-crop forward curve (December 2014 through July 2015 contract) continues to show a neutral to bearish level of carry. Major (long-term) support in the corn market is $3.24 1/2, the low from June 2010.

Soybeans: The DTN National Soybean Index (NSI.X, national average cash price) closed at $12.28, down $1.03 for the week. The NSI.X is set to test its previous low of $12.15 set the week of November 4, 2013, Last week's close put the NSI.X in the lower 38% of the 5-year price distribution range. National average basis (NSI.X - August futures contract) was calculated at 33cts under Friday evening, well below the 5-year average of 10cts under and implying that concern over tight supplies to meet demand could be waning. Next major (long-term) support below that near $11.16, a price that marks the 50% retracement level of the uptrend from $4.85 (February 2005 low) through $17.48 (August 2012 high).

New-crop Soybeans: The November contract closed 58.50cts lower. The secondary (intermediate-term) trend remains down as the November moved to a new low of $10.65. Weekly stochastics are approaching the oversold level of 20%, leaving the door open for continued pressure in the market. The forward curve (November 2014 through July 2015 contracts) remains neutral, though the strengthening carry is reflecting an increasingly bearish view of long-term supply and demand.

Wheat: The DTN National SRW Wheat Index (SR.X, national average cash price) closed at $5.01, down 21cts for the week. The last time the SR.X posted a weekly close below $5.00 was the week of July 6, 2010 when it was calculated at $4.90. National average basis (SR.X - September Chicago futures) was calculated at 25cts under Friday evening, holding near the 5-year high for last week at 23cts under. A firm basis isn't surprising given that the September Chicago futures contract is trading in the lower 17% of the market's 5-year price distribution range. Next major (long-term) support for the SR.X is between $4.75 and $3.75, a range established from January 2010 through July 2010.

SRW Wheat: The September contract closed 53.50cts lower. The secondary (intermediate-term) trend remains down as the contract posted a new low of $5.25, closing near that low at $5.26. Weekly stochastics are in single digits, continuing to indicate the market is sharply oversold. The September Chicago is now priced in the lower 17% of the market's 5-year price distribution range. A pocket of major (long-term) price support is between $5.83 1/2 (high from November 2009) and $4.25 1/4 (low from September 2009).

Posted at 9:08AM CDT 07/13/14 by Darin Newsom
Comments (4)
For additional analysis, mostly of the grain markets, here is a link to my appearance on the most recent Iowa Public Television Market to Market program: http://www.iptv.org/mtom/
Posted by DARIN NEWSOM at 8:34AM CDT 07/13/14
hard not to feel cheated when cost of production not covered.
Posted by andrew mohlman at 7:45AM CDT 07/14/14
darin dont forget king korn rules your dinner table and runs your car
Posted by andrew mohlman at 8:28AM CDT 07/16/14
Thanks for your comments Andrew. As you know, the analysis in "Louis Louis" is based on what is projected for corn supply and demand at this time. As stated in the piece, while supplies are expected to be cumbersome it is the 200 mb year-to-year reduction (by USDA) in demand that is the most concerning. This includes a 25 mb decrease in ethanol. As the piece concluded, none of this might come to pass. It's possible production isn't as large as expected and demand could stay stronger than projected. If so King Corn could come out of this with his head intact.
Posted by DARIN NEWSOM at 9:14AM CDT 07/16/14
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