March Wheat - 1 Lower
March Corn - 2 Lower
March Beans - Steady to 2 Lower
We had a question about cotton prices and competition with the grains for acreage next planting season. Cotton prices have been very stable the last 2 months, trading in a range between 80 and 90.
Prices are likely to work higher over the next 3 to 6 months. Back at the beginning of November the December contract marked a breakaway gap up on the daily chart and I said prices would rise - yes, but not so much then.
In the meantime, Cotton has formed a ledge to the right of the spike low and gap - called a spike and ledge. Remember, a breakaway gap is an urgent message from the market that the lower prices create to much demand or not enough supply and price wants to go up.
I think cotton prices will increase to 125 on the low side to 155 on the high end over the next 3 to 6 months. If soybean and corn prices rise about the same percentage, planting acres will not shift much. However, if cotton price gets ahead of the grains, cotton acres would go higher. The odds favor more cotton acres.
Or, if cotton prices increase at a higher rate than the grains, cotton acres would increase. Then of course there are other factors such as inputs and the bottom line (how much will I make if producing X commodity) which affect total acres of a particular commodity.
The bottom line is when the weekly cotton chart gets to 100, where the old midway gap is, acres will get competitive. Then, cotton will most likely correct from 100 down to 95-92, build some more energy then make a run towards 125. Check out the weekly chart going back several months so you can see the swing points, huge price range and the gap in the middle of the C leg going down.
Support for March Soybeans comes in about 1498 and then 1493. As anticipated, strong buying came into the market as price tested the old low at 1480 and price rallied 15 cents to test that psychological 1500 level.
At this juncture we might see more follow through buying tomorrow or a consolidation day first, before buying on Friday. We will see. Here is the wider view of beans on the daily chart so you can see how the 2020 uptrend line is attracting buyers.
March Corn corrected a little after the bullish day yesterday. Price fell back to 674, one of the support lines from the left chart (neckline swing highs). There is a decent chance that corn will rally to 696 by the end of the week. However, the next support below is the top of the triangle down sloping blue line near 667. Here is the updated 2 hour chart with today's support labeled "this high today" on the left.
March Wheat outdid Corn today and finished up 5 cents. It eclipsed the last swing high as you will see on the updated chart. New support is 734 where the line was violated yesterday then regained today. The next target to the upside is the 767 to 770 region. Today's new feature is "this line" on the right of the wheat chart.
The last thing I want to discuss are the current grain option prices. Because the volatility is low in all these markets, option prices are relatively low, which means if you are a grain options trader, it's more beneficial to buy rather than sell the options - the fear level of these markets tanking is low, so there is not much premium. Therefore your probability of success lies on the buy side.
This fact is also another argument that these grains have a bullish stance and price is likely to rise. If on the other hand, the fear of lower prices was high, option prices would also be high and whether you were trading calls or puts, the sell side would be more beneficial because of the higher premium/price - in other words there would be more premium available to bleed away.