Wednesday August 17, 2016 150 S. Wacker Dr., Suite 2350 Chicago, IL 60606 800-621-1414 or 312-277-0102 info@zaner.com www.zaner.com DAILY SOY COMPLEX COMMENTARY Surge in soyoil and oversold grains may support bounce OVERNIGHT CHANGES THROUGH 6:05 AM (CT): SOY BEANS +2.0, BEAN OIL +0.6, SOYMEAL -1.8 OVERNIGHT DEVELOPMENTS: November soybeans are trading 2 cents higher this morning. Malaysian palm futures were up 4.1% overnight and Chinese soybean prices closed up 1.2%. Global equities were mostly weaker overnight with the Shanghai Composite, the Nikkei and the Australian market showing strength. Overnight the market saw an emergence of US rate hike fears as the release of the FOMC meeting minutes are scheduled for later today. The markets saw a slight improvement in UK claimant data and that plays down the fear of slowing in that economy. The trade will be presented with a St Louis Fed speech around mid-session and early mortgage application data but the overall scheduled report slate today is mostly empty. NEAR-TERM MARKET FUNDAMENTALS: The sharp rally in palm oil this week should help support higher demand for soybean oil globally as the palm oil discount to soybean oil is now half of what it was one year ago and India's palm oil share of edible oil imports could reach a record low. With the other grains so oversold, and short-term demand indicators still bullish, the market seems to have enough uncertainty to see a further advance. Exporters yesterday reported a sale of 119,000 tonnes of US soybeans sold to China. The forecast going out two weeks provides much cooler temperatures with periodic rains which will finish off the soybean crop nicely. There have been minor concerns of some areas in the southern Delta which are dealing with flooding issues. With the weather forecast looking benign, the soybean yield should hold steady if not increase in subsequent reports. The demand issue for the 2015/2016 crop year has been addressed by the USDA in last week's report by raising exports 85 million bushels which lowered the carryout to 255 million bushels. Looking out to the 2016/2017 balance sheet, the demand structure must remain stout to rationalize the record export and crush outlook. However, if the weather remains favorable, we cannot rule out a yield as high as 49.5 bushels/acre which would push ending stocks up to 378 million bushels compared with the previous three years of 255, 191 and 92 million bushels. Resistance levels for November soybeans come in at 1033 to 1036, which would be more than 70 cents up from Friday's low. If we reach this level, look to buy the November 970 put. Producers who need some downside production for soybeans or even corn exposure might consider buying this put as well. November soybean support moves up to 995 1/2 and 989, with 1033 and 1036 as next stiff resistance. After closing higher for seven sessions in a row, December oil looks overbought and is at 83. Next resistance is at 34.94. * Buy Nov soybean 970 put at 10 1/2 with an objective of 59. Risk a total of 6 cents. 1)* Long November soybeans from 983 with an objective of 1032. Exited short 1050 call for a 1 3/4 cent loss. Also
long the November soybean 970 put from 31 1/2 cents. Risk a total of 15 cents on the spread. 2) * Exited Nov 1000/1080 bull call spread for a gain of 10 3/4 cents. SOYBEAN COMPLEX TECHNICAL OUTLOOK: SOYBEANS (NOV) 08/17/2016: The moving average crossover up (9 above 18) indicates a possible developing short-term uptrend. Momentum studies are trending higher but have entered overbought levels. The market's short-term trend is positive on the close above the 9-day moving average. The market could take on a defensive posture with the daily closing price reversal down. The market has a slightly positive tilt with the close over the swing pivot. The next upside target is 1022 1/2. The next area of resistance is around 1014 1/2 and 1022 1/2, while 1st support hits today at 1000 and below there at 993 1/4. SOYBEAN OIL (DEC) 08/17/2016: Rising stochastics at overbought levels warrant some caution for bulls. The market's short-term trend is positive on the close above the 9-day moving average. It is a mildly bullish indicator that the market closed over the pivot swing number. The near-term upside target is at 34.34. The market is approaching overbought levels with an over 70. The next area of resistance is around 34.12 and 34.34, while 1st support hits today at 33.52 and below there at 33.13. SOYMEAL (DEC) 08/17/2016: Positive momentum studies in the neutral zone will tend to reinforce higher price action. The intermediate trend has turned down with the cross over back below the 18-day moving average. The daily closing price reversal down is a negative indicator for prices. It is a slightly negative indicator that the close was lower than the pivot swing number. The near-term upside target is at 340.6. The next area of resistance is around 335.7 and 340.6, while 1st support hits today at 328.8 and below there at 326.7. DAILY CORN COMMENTARY Choppy to higher trade just ahead; 175.1 or 173 yield? OVERNIGHT CHANGES THROUGH 6:05 AM (CT): CORN -0.2 OVERNIGHT DEVELOPMENTS: December corn was trading unchanged this morning. Outside market forces look slightly negative. NEAR-TERM MARKET FUNDAMENTALS: Since posting contract lows, the market has closed higher for 3 sessions in a row. There was lackluster trade in corn yesterday with December corn matching Monday's high of 339 1/4. Some strength was noted in the calendar spreads with Sept/Dec spread closing at -9 3/4, up 3/4 cent on the day. We will see some fresh yield analysis next week with the Pro Farmer crop tour starting Monday. It will be interesting to see if they agree with what the USDA reported on their first look at the crop. We still think that a 173 bushels/acre type yield is more in-line with the type of weather we experienced in June and July, and the very optimistic ear weight calculation. A minor adjustment back to a 173 yield (still a new record) would leave ending stocks near 2.233 billion bushels as compared with the current USDA estimate of 2.409 billion. Look to sell puts on breaks and sell calls on rallies as a strategy going forward. A break to support for December corn to 329 would provide an opportunity to sell the Dec 330 put near 14 3/4 cents, while a rally to resistance at 351 provides an opportunity to sell the 360 call for 12 1/2 cents. December corn close-in support moves up to 332 with 344 1/2 and 351 1/4 as resistance. It will take a turn to poor weather or a shift in demand expectations to expect much more than a short-covering bounce.
Short October corn 340 put from 14 1/2 cents with an objective of zero. Risk to 20 1/2. CORN TECHNICAL OUTLOOK: CORN (DEC) 08/17/2016: Positive momentum studies in the neutral zone will tend to reinforce higher price action. The market's short-term trend is positive on the close above the 9-day moving average. It is a mildly bullish indicator that the market closed over the pivot swing number. The next upside objective is 342. The next area of resistance is around 339 3/4 and 342, while 1st support hits today at 334 3/4 and below there at 332. DAILY WHEAT COMMENTARY Choppy trade continues; minor positive news could spark buying OVERNIGHT CHANGES THROUGH 6:05 AM (CT): WHEAT -1.4 OVERNIGHT DEVELOPMENTS: December wheat was down 1/2 of a cent on the session this morning. Milling wheat futures in Europe are up 0.5%. Outside market forces look slightly negative. NEAR-TERM MARKET FUNDAMENTALS: The market seems to have a little "less" bearish fundamentals than July and futures are still consolidating just above contracts lows. With high open interest and massive net short position by fund traders, the market is still vulnerable to a recovery bounce. Not a bull trend, just a recovery bounce. December wheat traded in a tight range yesterday before closing modestly higher. We continue to trade sideways with some strength in the calendar spreads again. The September/December spread gained 1/4 cent to close at -16 cents. With 9 trading days left in the VSR review period, the calculation needed to increase the storage rate is -16 3/4 cents. It looks as if we will go down to the wire to see if we will increase to 11 cents a month or not. With the increase of Russia's wheat crop to 72 million tonnes from 65 million, there are issues of running out of storage for this year's bumper crop. This should keep Russia offers into the world export market to be ample and competitive. Ukraine's Agriculture Ministry sees 2016 grain harvest near 63 million tonnes, up about 3 million from last year. While world ending stocks are expected to increase 11 million tonnes to a new record high, China ending stocks are expected to be up 15 million tonnes this year which waters down the bearishness of new record high ending stocks as China stocks are currently not available on the world market and China is also not a major importer. Managed money traders continue to hold large short positions, so the market is vulnerable to a short covering event. The 461 level would be a logical retracement area for the December contract to test. Buying support is at 433. December wheat is still operating under the positive influence of the weekly reversal last week. Consider buying December wheat into the support zone of 433 to 429 3/4 with 453 1/2 and 461 as upside targets. 1) Long October Wheat $4.40 call from 17 cents with an objective of 49 1/2 cents and risk 9 cents from entry. 2) Long December Wheat $4.50/$5.00 bull call spread at 16 3/4 cents with an objective of 38 cents. Risk a total of 7 cents from entry.
WHEAT TECHNICAL OUTLOOK: WHEAT (DEC) 08/17/2016: Positive momentum studies in the neutral zone will tend to reinforce higher price action. The cross over and close above the 18-day moving average indicates the intermediate-term trend has turned up. The daily closing price reversal up is a positive indicator that could support higher prices. The close over the pivot swing is a somewhat positive setup. The next upside target is 449 1/4. The next area of resistance is around 444 3/4 and 449 1/4, while 1st support hits today at 434 1/4 and below there at 428. KC WHEAT (DEC) 08/17/2016: Stochastics are at mid-range but trending higher, which should reinforce a move higher if resistance levels are taken out. The intermediate trend has turned down with the cross over back below the 18-day moving average. It is a slightly negative indicator that the close was under the swing pivot. The nearterm upside objective is at 445 1/2. The next area of resistance is around 441 1/2 and 445 1/2, while 1st support hits today at 433 and below there at 428 1/4. MINN WHEAT (SEP) 08/17/2016: The cross over and close above the 60-day moving average is an indication the longer-term trend has turned positive. Daily stochastics have risen into overbought territory which will tend to support reversal action if it occurs. The market's close above the 9-day moving average suggests the short-term trend remains positive. It is a mildly bullish indicator that the market closed over the pivot swing number. The near-term upside objective is at 527. The 9-day over 70 indicates the market is approaching overbought levels. The next area of resistance is around 521 1/2 and 527, while 1st support hits today at 511 1/2 and below there at 506 3/4. RICE (NOV) 08/17/2016: Momentum studies are rising from mid-range, which could accelerate a move higher if resistance levels are penetrated. A positive signal for trend short-term was given on a close over the 9-bar moving average. It is a mildly bullish indicator that the market closed over the pivot swing number. The next upside target is 10.935. The next area of resistance is around 10.730 and 10.935, while 1st support hits today at 10.290 and below there at 10.055. DAILY TECHNICAL STATISTICS STOCH D STOCH K 4 DAY 18 DAY 45 DAY 60 DAY CLOSE GRAIN COMPLEX CNAZ6 337 1/4 46.50 40.42 32.66 46.67 334.75 333.83 336.38 364.36 378.32 CNAU6 327 1/2 45.93 39.62 27.84 41.51 324.31 323.58 327.28 356.93 372.31 SSAX6 1007 1/4 57.20 50.33 54.07 71.21 995.56 985.42 979.67 1046.07 1057.30 SSAU6 1019 1/2 55.62 49.84 54.21 70.53 1011.00 1001.14 994.99 1057.42 1068.42 SMAZ6 332.3 43.47 41.25 27.29 33.66 331.18 330.66 333.71 361.76 367.31 BOAZ6 33.82 82.95 72.92 84.04 92.60 33.03 32.14 31.24 31.48 31.79 WHAZ6 439 1/2 48.43 44.75 40.30 49.86 438.69 437.81 438.92 458.03 472.50 WHAU6 423 1/2 56.07 49.67 55.01 66.58 421.06 417.69 415.49 435.83 451.39 RCAX6 10.510 62.41 54.51 30.93 51.85 10.06 9.88 10.03 10.73 11.00 KWAZ6 437 1/4 47.26 44.75 42.59 45.39 438.81 436.97 437.90 449.76 463.69 MWAU6 516 1/2 74.78 63.92 74.84 82.39 512.25 503.53 496.53 506.38 515.71 OTAZ6 187 1/4 43.26 39.42 18.05 23.59 184.25 184.44 190.71 200.35 205.05 DAILY SWING STATISTICS Contract Support 2 Support 1 Pivot Resist 1 Resist 2 GRAIN COMPLEX CNAZ6 Corn 332 334 3/4 337 339 3/4 342 CNAU6 Corn 322 1/4 325 327 330 331 3/4
SSAX6 Soybeans 993 1000 1007 3/4 1014 1/2 1022 1/2 SSAU6 Soybeans 1003 3/4 1011 1/2 1020 1027 1/2 1036 1/4 SMAZ6 Soymeal 326.6 328.7 333.6 335.7 340.6 BOAZ6 Soybean Oil 33.12 33.51 33.73 34.12 34.34 WHAZ6 Wheat 427 3/4 434 438 1/2 445 449 1/4 WHAU6 Wheat 409 416 3/4 422 1/2 430 1/4 436 RCAX6 Rice 10.055 10.290 10.495 10.730 10.935 KWAZ6 KC Wheat 428 1/4 433 437 441 1/2 445 3/4 MWAU6 MINN Wheat 506 3/4 511 1/2 517 521 1/2 527 1/4 OTAZ6 Oats 184 185 3/4 187 188 3/4 190 DAILY CATTLE COMMENTARY In position to move up due to big discount, firm demand Weakness in the hog market helped to spark some aggressive selling in cattle yesterday but support seems to have held. It may be difficult to expect aggressive selling in October cattle under $112.50 when cash traded at $118/$119 on Friday and beef prices are up 1% over the past week. Demand is expected to improve as retailers book beef for Labor Day holiday. The market saw a strong recovery from being sharply lower on the session yesterday, but could not hold the strong rebound and still closed moderately lower on the day, but well above the early lows. Talk that cash bids emerged near $117.00, down $2.00 on the week helped to spark the selloff along with a sharp break in hogs. USDA boxed beef cutout values were up 47 cents at midsession yesterday and closed 17 cents higher at $201.84. This was up from $199.89 the prior week and up to the highest level since July 19th. The USDA estimated cattle slaughter came in at 113,000 head yesterday. This brings the total for the week so far to 226,000 head, up from 223,000 last week at this time and up from 215,000 a year ago. For the Cattle-on-Feed report on Friday, traders see placements for the month of July at 100.5% of last year but the range is 95-108.9% which shows plenty of uncertainty. With cheap corn and feedwheat, we would lean toward higher placements. Marketings in July are expected near 99.7% of last year (98.5-103.2) with on-feed supply on August 1st expected at 101.4%. Speculators continue to try to press the downside but with the discount, it is difficult to find aggressive new sellers. October cattle short-term buying support is at 112.57 and then key support at 112.17, with 117.05 as next upside target. Consider buying corrections. Buy October cattle at 112.17 with an objective of 116.90. Risk to 110.95. CATTLE COMPLEX TECHNICAL OUTLOOK: LIVE CATTLE (OCT) 08/17/2016: Momentum studies trending lower at mid-range should accelerate a move lower if support levels are taken out. The close under the 18-day moving average indicates the intermediate-term trend could be turning down. The market tilt is slightly negative with the close under the pivot. The next downside
target is 111.170. The next area of resistance is around 114.500 and 115.600, while 1st support hits today at 112.300 and below there at 111.170. FEEDER CATTLE (OCT) 08/17/2016: Momentum studies trending lower from overbought levels is a bearish indicator and would tend to reinforce lower price action. The market's close below the 9-day moving average is an indication the short-term trend remains negative. The swing indicator gave a moderately negative reading with the close below the 1st support number. The next downside objective is 140.975. Daily studies pointing down suggests selling minor rallies. The next area of resistance is around 143.800 and 145.075, while 1st support hits today at 141.750 and below there at 140.975. DAILY HOGS COMMENTARY Very weak technical action yesterday; Feb reversal Friday; probe The market continues to probe for a short-term low. Open interest is down to the lowest level since March and the market discounts of futures to cash seem to have priced-in a cheap enough level to spark better demand when the weather cools. The market closed sharply lower yesterday as an early rally to the highest level since July 27th failed to attract new buying and the selling pressure intensified late. Talk that the pork belly strength will be short-lived and ideas that pork production will continue to increase in the weeks ahead helped to pressure. Belly prices fell $14.86 to $80.43. USDA pork cutout values, released after the close yesterday, came in at $73.12, down $2.28 from Monday and down from $75.46 the previous week. This is the lowest since January 19th. The CME Lean Hog Index as of August 12th was 67.03, down 54 cents from the previous session and down from 69.93 the previous week. The USDA estimated hog slaughter came in at 433,000 head yesterday. This brings the total for the week so far to 858,000 head, down from 867,000 last week at this time but up from 843,000 a year ago. China wholesale prices rallied about 21% off of the November lows to a June high and gave back about 40% of the rally to a late July low. The market seems to be turning up off of the late July lows. China import demand remains very strong and hit a record high this past month. US exports to Mexico for the first half of 2016 were down 8% from last year and this was the key offset to China demand. February hogs experienced a key reversal on Friday and significant divergence shows a loss in downside momentum. Consider buying February hogs near the 59.77-59.32 support zone with 62.57 and 64.00 as key resistance. Buying support for October hogs is at 59.77. Short October Hog 54.00 put from 172 with an objective of zero. Risk to 107. PORK COMPLEX TECHNICAL OUTLOOK: LEAN HOGS (OCT) 08/17/2016: Positive momentum studies in the neutral zone will tend to reinforce higher price action. The close below the 18-day moving average is an indication the intermediate-term trend has turned down. A negative signal was given by the outside day down. The market's close below the 1st swing support number suggests a moderately negative setup for today. The next upside target is 64.250. The next area of resistance is around 61.650 and 64.250, while 1st support hits today at 58.050 and below there at 57.020.
DAILY TECHNICAL STATISTICS STOCH D STOCH K 4 DAY 18 DAY 45 DAY 60 DAY CLOSE MEAT COMPLEX LCV6 113.400 47.83 50.40 75.66 65.67 114.11 114.59 113.54 112.44 113.29 FCV6 142.775 51.12 53.02 78.81 71.58 143.74 144.22 142.01 139.84 140.39 LHV6 59.850 45.20 41.53 28.27 38.94 60.19 59.29 60.30 66.21 67.16 DAILY SWING STATISTICS Contract Support 2 Support 1 Pivot Resist 1 Resist 2 MEAT COMPLEX LCV6 Live Cattle 111.150 112.270 113.370 114.500 115.600 FCV6 Feeder Cattle 140.975 141.750 143.025 143.800 145.075 LHV6 Lean Hogs 57.020 58.020 60.620 61.650 64.250 ***This report includes information from sources believed to be reliable and accurate as of the date of this publication, but no independent verification has been made and we do not guarantee its accuracy or completeness. Opinions expressed are subject to change without notice. This report should not be construed as a request to engage in any transaction involving the purchase or sale of a futures contract and/or commodity option thereon. The risk of loss in trading futures contracts or commodity options can be substantial, and investors should carefully consider the inherent risks of such an investment in light of their financial condition. Any reproduction or retransmission of this report without the express written consent of Zaner Group, LLC. is strictly prohibited. Violators are subject to a $15,000 fine per violation.