Daily Grains Analysis for February 23, 2018

Grain prices are higher again lead by soybean futures which continue to benefit from a dry weather forecast in South America.  A bearish tone for soybeans has been ignored as soybean acreage will likely catch up with corn plantings in 2018, according to the USDA. The agency expects farmers to plant 90M acres of both corn and soybeans for the 2018-19 season, according to USDA Chief Economist Robert Johansson, who said at an annual agency conference. American farmers have typically opted for corn over soybeans, but strong demand for oilseed has recently started to upset that balance. Wheat acreage is expected to rise 1% to 46.5M acres.

Corn Prices

Corn prices continue to consolidate, and after closing below support near the 10-day moving average at 3.66 on Wednesday they recaptured these levels on Thursday.  The first level of target resistance is seen near the August highs at 3.75 per bushel. Momentum is negative as the MACD (moving average convergence divergence) index generated a crossover sell signal. This occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses below the MACD signal line (the 9-day moving average of the MACD line).

Soybean Prices

Soybean prices continued to move higher despite news that the USDA sees more soybeans planted in the coming season. The short covering rally that occurred was likely a function of traders exiting short positions. According to the latest commitment of trader’s report released for the date ending February 13, managed money reduced short position in futures and options by 37K which was near 50% of the total short open interest.  Open interest that is long futures and options outnumbers open interest that is short futures and options by 43K.

Support on soybeans is seen near the 10-day moving average at 1014, and then a downward sloping trend line that comes in near 1010. Momentum is accelerating higher as the MACD (moving average convergence divergence) histogram prints in the black with an upward sloping trajectory which points to higher prices.  The RSI (relative strength index) is moving higher reflecting accelerating positive momentum. The only caveat is the current reading of 71 is above the overbought trigger level of 70 and could foreshadow a correction.

Wheat Prices

Wheat prices dropped and then bounce at support which is seen near and upward sloping trend line near 4.44. Resistance is seen near the 10-day moving average at 4.55. Momentum is negative as the MACD (moving average convergence divergence) index generated a crossover sell signal. This occurs as the MACD line( the 12-day moving average minus the 26-day moving average) crosses below the 9-day moving average of the MACD line).