July 27, 2015 AgriVisor Afternoon Marketwatch

Monday, July 27, 2015

**** Corn futures tumble 18 to 19 1/2 cents; soybeans drop 28 to 31 3/4; Chicago wheat falls 7 to 9 1/4. 

   Grains take it on the chin Monday as an improved weather outlooks couples with broad market pessimism to form a serious headwind for prices.  The grains were also pressured by export concerns.  Corn led the way lower, down nearly five percent on the day.

   A risk-off mentality spread into the agriculture space from outside financial markets.  Chinese stocks took a dive and had a slight panic creeping into all international equity markets.  Money managers are using the news as reason for some long liquidation.  Index investors do not yet see the potential for strong return in the grains and are keeping their distance for the most part.

   Weather reports are starting to lean negative for grain prices.  A drier, 6-10 day forecasts fades into a wetter 8-14 day outlook.  It is expected that we will carry cooler than average temperatures into the first half of August.  Better growing conditions are bearish the grains, but most would argue that the board is still deserved some weather-risk premium here.          

   Weekly export inspections were digested.  Corn shipments at 43.6 million bushels were solid enough, but remain behind the average pace needed to meet the USDA target.  Soybean inspections also fell behind pace, having tallied just 4.4 million bushels last week.  Sustained strength in the dollar, surpluses in South America and worry about Chinese demand weigh on the outlook for exports going forward.     

   Chart traders were short-selling the grains.  The bears forced a down-gap onto the corn and soybean graphs at the start of trading Sunday night.  Trading through the rest of the week will confirm whether or not the gap lower is a sign of exhaustion.  The move pulled new-crop corn and soybean futures below their 50- and 100-day moving averages.  Prices did settle outside of their 20-day Bollinger Bands, a sign that the move may have been overdone for the near-term. 

***** Hogs back away from a test of resistance from the major moving averages; cattle futures likely to continue on the defensive this week.   

   Bull spreading defined the live cattle futures trade on Monday.  Feeders fell flat despite sharply lower corn prices.  Last Friday’s new supply numbers indicate traction in herd expansion efforts. 

   Hog futures featured a probe toward recent contract lows but ended up only moderately weaker on the day.  Lower prices in the direct market weighed on futures.  The broad commodity market sell-off didn’t help any.