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Russia-Ukraine, Tech Talk & Rain Days 02/21/2022


US commodity futures markets are closed for President’s Day. They will open regular time this evening.

 

President Biden had two phone conversations with Russia’s President Putin Sunday, the last one was 2:32 AM Monday morning in Moscow.

CBS News reported at 7:59 PM Eastern Time Sunday that, “Putin had just ordered Russian to invade Ukraine in its entirety, with reserve units following to run an occupation.”

CNN reported just before 9 PM Eastern Time:

“President Biden accepted in principle a meeting with President Putin in Paris this Wednesday if an invasion hasn’t happened,”

White House Press Secretary Jen Psaki reported, “We are always ready for diplomacy. We are also ready to impose swift & severe consequences should Russia instead choose war. And currently, Russia appears to be continuing preparations for a full-scale assault on Ukraine very soon”.

 

Tech Talk from the Tech Guy

There are two primary types of price charts:

The price chart most people use are bar charts with each vertical line being the trading range for one day for a given futures contract from the first trading day of the contract to the last trading day for that contract, spanning usually two years to as much as four years.

December corn contracts often trade four years, November soybeans and CBOT July wheat three years, July KC wheat two years. The first trade of any contract happens the first day there is an offer and a bid at the same price. Theoretically, March 2031 corn could start trading this week… or any futures contract not already trading could start any day this week or next week, etc. Charts plotting each day’s price range from day one to the last trading day of a given futures contract are Static Charts. Think Static = One contract price history with a beginning & an end.

The second type of chart is a Continuation Chart, aka Dynamic Chart.

A Continuation chart has no beginning and no end. It shows the price range of every contract month beginning when that month’s futures contract becomes the front (lead, spot) month.

For example, corn contracts are March, May, July, September and December. March corn quits trading in March and that is when May becomes the front month; the May price range will be plotted until it will be replaced by July, which will be replaced by September, which will be replaced by December, which will be replaced by March, etc.

Thus, during the latter part of December, all of January and February, March contract is the spot month and its daily price ranges are charted on the Continuation chart. During the latter part of March and April, May corn is the spot month and its daily price range is plotted on the Continuation chart. Likewise, during latter part of May and June, July is the spot month and it its daily prices are charted on the Continuation chart, etc. Since there is no beginning and no end to Continuation charts, when we look at a long term charts, they will always be Continuation charts.

Continuation charts are bar charts using the same vertical lines as Static charts, but each vertical line may be for one day, one week or one month. On a 10+ year price chart of any commodity, each vertical bar will the price range for one month. On a 3 or 5 year chart, each bar will be one week’s price range. A two year chart or less, each vertical line is one day’s price range.

Now, pay attention: Depending on who is preparing a continuation chart, the front month switch (roll) may occur three different days:

  1. After the last trading day of a spot contract (around the 14th of the contract month)

  2. On the 1st notice day of deliveries of that contract (last business day of the preceding month)

  3. A liquidity roll when 75% of the trading volume has shifted to the next contract month (usually 2-4 days before first notice day)

For charting purposes, the last trading day roll or shift continuation is the best for technical analysis because it contains ALL price ranges for the last days of every contract!

The corn continuation chart below is a Liquidity Roll. Note the roll from July to September was on Friday, June 25th, (the third business day before first notice day) to Monday, the 28th. Note the nearly 90 cent gap between the low on Friday and the high on Monday. Note also the gap narrowed to about 28 cents by July 1st (the two green ovals).

By the way, the red vertical lines are the days that corn settled lower and green lines are the days that corn settled higher.

The red oval on August 8th is a “swing high”, meaning it failed to even touch the bottom of the 28 cent gap and sent the market to a new low for the summer the first part of September.

The corn market has been making higher highs and higher lows ever since. It was mid-November before corn returned to the swing high (yellow oval) made July first and mid-December when that swing high was exceeded (blue circle).

Note the importance of how long the market traded back and forth (consolidation, building energy) before going higher.

The upward trend lines function as support moving forward from Mid-January. Also notice how the upward force is accelerating (becoming more steep) once the market settled above the bottom of the 28 cent gap (gray oval) and even more steep when corn settled above the top of 28 cents gap (white circle) - more bullish!


If you take a look at our seasonal price charts on our web site, you will see some commodities have two seasonal charts; one is Static based and another is a Continuation based. They are somewhat different.


 

Market Data


This morning: Crude oil is at $91.32, up 0.25 The dollar index is at 95.81, down 0.23 March palm oil is at 6161 MYR, up 153 after making new contract high today at 6,170 MYR. Palm oil owns 32% and soybean oil owns 28% world market share.


 

Rain Days Update


Rondonópolis, Mato Grosso, in the heart of Brazil's most productive soybean area, received 0.2 inches of rain yesterday; 0.1 inches a year ago and 0.6 inches two years ago (one inch = 24.5 mm). Yesterday's high temperature was 83°F. Day time highs the next ten days will range from 84 to 92°F (100°F = 38°C). Yesterday, in the dry areas of South America: Santa Maria high temperature 106°F with 0 inches rain. Cordoba high temperature 86°F with 0.1 inches rain. Salto high temperature 96°F with 0 inches rain. Total rainfall and temperatures expected in the next ten days: Santa Maria 2.59 inches, 81 to 95°F. Cordoba 1.26 inches, 72 to 83°F. Salto 2.14 inches, 77 to 86°F. The Western Corn Belt has 3 less rain days in the 10 day forecast than yesterday and the Eastern Corn Belt has 1 more rain days than yesterday.


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