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Tech Guy Weekend Comments for 7/3/22

The God's honest truth: I wrote my comments down yesterday afternoon before I read any of Roger's comments in today's email regarding conditions of crops. You will understand down below.

Tuesday morning at 8:30 CDT the grains have a hard opening on the floor. Essentially it means there is no overnight opening or trading. Historically this opening is dramatic - There is some kind of gap away from the Friday close.

I have rarely heard this phrase before so I wanted more information. The definition of a hard opening from the Cambridge Dictionary: an occasion when a business is opened to the public for the first time in a way that is intended to attract a lot of attention - that it will.

The charts indicate the selling in corn and soybeans was way overdone last week - technical areas were violated left and right to the downside on the intraday (eg. 1 hour chart) charts. The only thing I could think of after reading about the larger than expected on farm stocks in the report, was that the market forced physical grain out of producers hands (off the farm) by panic selling.

What I think was happening in corn last week and next is "sell the rumor, buy the fact" that there is still a significant risk to the corn crop - it is not made yet. see below.

Otherwise, the trading on last Thursday and Friday made absolutely no sense - a neutral corn number and a very bullish bean planting acres number. For Soybeans, it was a buy the rumor and sell the fact of less acres.

The supply/demand point on the charts became very overbalanced to the supply (down) side last week. The market told us there will be plenty of extra ending stocks for new crop. We all know this is not true, yet.

This is Newtons third law: For every action there is an equal and opposite reaction - when the action is down, the up reaction takes about 1.3-1.5 X more time than the action. The down move took about 9 trading days - the up reaction should take 12-15 trading days - which puts us into the 35-38 day time cycle for the next swing point (probably high) - July 22-25.

It is true - sometimes I have difficulty trusting my own work. The June 17th cycle point was mentioned a couple of times beforehand. Then it took me a couple of days to catch on. "oh, that's what I was talking about." Hopefully many of you benefitted from this date in a timely manner. I will remember next time!

If you showed the current Dec Corn daily chart to someone without the dates marked on the bottom, they would think last week was September or October - harvest time where the yields are mostly known - a market trying to find a harvest low.

Back to reality: crop conditions are not in that great of shape and they are trending to worse still - I'm betting on a 3-5% decrease in GE on Tuesday (see rainfall map below). Pollination has not occurred yet (for the bulk of the corn belt). In other words, there is still quite a bit of risk to production at this point. The La Nina remains very strong and it's not showing any signs of weakening at this point.

That means the risk of the threatening weather pattern (High pressure/temps moving over the central belt) is still fairly high. Traders (funds) will decide they have to put risk premium (higher prices) back into corn and beans. The less threatening forecast was sold last week and I believe the disappointing rains/new forecast/poor crop conditions will be bought next week.

The primary market drivers this time of year are amount of rainfall/lack and crop conditions. The crop conditions went down last week because of lack of rain over the previous 2 weeks. Actual rainfall has been less than 25% of normal covering about half of the corn belt and only 10% of normal in some of those areas - in the last 2 weeks from yesterday.

See for yourself in these % of normal precipitation maps of the corn belt from NOAA - representing the last 2 weeks. In the first one the intensity is turned up so you can see the colors. The second map is lightened up so you can make out the states (see what/where you're looking). The 3rd map is corn planted acres in 2021 - from NASS.

Here is the weekly Dec Corn chart (first) and Nov Bean chart (below) going back 2 years showing the uptrend line - these markets remain in strong long term uptrends. I expect rebounds towards the highs in the coming days and weeks.

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