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Agricultural Commodities

Solid Brazilian Rains Dampen Soybean PricesSoybean prices have been on a rollercoaster fuelled by turbulence over the last month amid elevated weather concerns, changing production yields, and geopolitical upheavals affecting prices. Winters are vital for bean traders. This paper delves into the various forces at play to guide traders and portfolio managers to navigate through the rough weather. Favourable weather combined tail winds for Soybean harvests plus weakness in destination markets are setting the ground for bearishness in bean prices. A short position in CME Soybean futures can be used to manage risk. US SOYBEAN HARVEST RESULTS Soybean harvest in the US has concluded providing a more certain supply outlook for the ongoing marketing year. Next Soybean harvest will take place in March-June in South America. Until then, current inventories will have to meet the demand. As per USDA update , Soy harvesting in the US is 90% complete. Yields for the 2023/2024 marketing year were updated to 49.9 bushels/acre in the November WASDE report compared to 49.6 bushels/acre in the October report. This resulted in an upward revision to the production and ending stocks figures as well since the consumption forecast remained unchanged. A similar update was reported by USDA in the global soybean outlook which suggested that global soybean production would be marginally higher. Despite the upward revisions, the US production figures represent a YoY decline of 4 million MT (-3.3%). The upward revision then, provides a larger buffer to account for potentially higher consumption. This is vital because bean inventory balances in the US this year are tighter than the previous two years. US Ending stocks are forecast to be 6.68 million MT compared to 7.3 million MT last year. As a result, although the upward revision expanded the buffer, it is quite narrow which could exacerbate a shortage in case consumption edges higher. SEASONAL TRENDS As highlighted by Mint in a previous paper , seasonal trends in Soybean futures are affected by harvest. During harvest, prices decline before recovering post-harvest as inventories are depleted. However, the seasonal trend is distinct during El Niño years where returns underperform the usual average, especially in December-January. BRAZIL WEATHER CONCERNS LIFTED Soybean markets are heavily influenced by weather in Brazil. Hotter than expected weather and erratic precipitation raised concerns for Brazilian crops which drove Soybean prices higher over the past month. Brazil experienced a strong heat wave last month which has a negative effect on crops. Weather effects on crop yields are most pronounced during the early stages of growth. However, weather is now set to improve as weather forecasts suggest the arrival of rains and milder temperatures ahead. Both are positive for the bean crop. Still, higher-than-expected precipitation remains a concern for the crop. As highlighted by University of Delaware , too much rainfall during the planting stage can lead to significant yield reduction. Source: USDA Brazil is the largest producer of Soybean and its harvest had been expanding rapidly over the past three years. This had previously led to oversupply concerns in global markets, exacerbated by a low demand environment in the largest soybean consumer China. Though consumption in China is forecast to increase YoY, it will not be enough to match the increase in global production (especially in Brazil) per the latest WASDE estimates . Net effect is larger ending stocks globally which is bearish for Soybean prices. EL NIÑO UPDATE In this El Niño year, unexpected weather pose significant concerns as it deviates from the anticipated impact on soybean crops outlined in our previous paper . While El Niño typically brings favourable conditions, such as increased rainfall and mild weather leading to a 3.5% higher soybean yield on average. Brazil is experiencing unexpectedly warm weather and low precipitation, diverging from the usual patterns. The unpredictability of these conditions amplifies their potential impact on prices compared to previously expected El Niño effects. Source - NOAA El Niño continues to evolve adversely as Oceanic Niño Index (ONI) has reached its highest level since 2016. Sea Surface Temperatures (SST) at Niño 3.4 is another indicator that has reached an all-time-high. Source - NOAA SIGNAL FROM SOYBEAN FUTURES MARKET Technical signals suggest a bearish trend in bean futures. Front month bean contract was on an upward trend since mid-October. The front month contract tested but failed to pass a key pivot resistance level of 1,381 USc/bushel. Price has since declined 5% and points to a reversal as the Moving Averages close to forming a bearish crossover. Asset managers switched from net short to net long positioning over the past month. However, over the last 2 weeks, asset managers have reduced net long positioning by 20k contracts. Options markets point to bearishness as participants are positioned for Soybean price to decline with a P/C ratio of 1.31 which suggests more bearish bets than bullish ones. Further, bearish bets have increased sharply over the past week with the largest increase in puts on the April monthly contract and December monthly contract. Moreover, participants have reduced call OI on the front-month December contract. HYPOTHETICAL TRADE SETUP With the overhang of negative weather in Brazil lifted, bean prices are likely to decline and pare gains from the past month due to a weak demand environment. Market metrics also suggest a bearish trend. To gain exposure, investors can deploy a short position on Soybean futures expiring in Feb ( ZSH2024 ). CME Soybean futures expiring in March require a maintenance margin of USD 2,800 (as of December 4th) and provide exposure to 5000 bushels. Entry: USc 1,336 Target: USc 1,272.25 Stop Loss: USc 1,381 Profit at Target: USD 3,187 Loss at Stop: USD 2,250 Reward/Risk: 1.42x MARKET DATA CME Real-time Market Data helps identify trading set-ups and express market views better. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com DISCLAIMER This case study is for educational purposes only and does not constitute investment recommendations or advice. Nor are they used to promote any specific products, or services. Trading or investment ideas cited here are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management or trading under the market scenarios being discussed. Please read the FULL DISCLAIMER the link to which is provided in our profile description.
CBOT:ZS1!Short
by mintdotfinance
1
Have you had your coffee yet?We already know that coffee beans have always been one of the most traded commodities in the world, specifically second, so why the sudden interest again? Figure 1: Summary of World Coffee In recent years, global consumption has increased at a higher rate than production due to pent-up demand. This rather large deficit in balance in the past two years puts the coffee market in an interesting spotlight. Nonetheless, arabica beans continue to be the more favored selection, with South America as the central production region, driven mainly by Brazil. Gaining Access to This Market Amongst various coffee derivatives, a coffee futures contract is the most common way to trade coffee. The 4/5 Arabica Coffee Futures (ICF) listed by Brasil, Bolsa, Balcão (B3) Exchange is an example of such contracts. For those unfamiliar with futures contracts, it is a legal agreement to buy or sell a specified asset at a predetermined price for delivery at a specified time in the future. For the ICF contract, the asset is 100 bags of 60 kilograms filled with grade 4-25 or better Arabica coffee bean produced in Brazil that is meant to be delivered in the city of São Paulo, Brazil, or a B3 accredited warehouse. The ICO’s Grading and Classification of Green Coffee states that “coffees of the highest altitudes are denser and larger in size than those produced at lower altitudes.” Loosely speaking, larger beans with higher density are better. The grade indicators refer to the number of defects found in a 300g sample. To achieve a 4-25 grade, the coffee must be classified by B3 in accordance with its rules and regulations. This grading system is more specific to Brazil-produced beans. Other coffee-producing countries have other specifications and classifications. The Trampoline Effect Figure 2: Supply & Demand Factors Historically, the ICF future prices resemble that of a trampoline, with major support lines at the 124.55 and 103.60 levels. Let us explore some of the factors that caused these jumps previously; bear in mind that consumption of Arabica beans has been steadily increasing since the 1990s. S1: Poor weather conditions in South America in 2010 Brazil suffered from poor weather conditions and faced significant problems in meeting the expected crop yield. Large producers were also considering hoarding their stocks. The problem was further exacerbated by the backdrop of record low arabica stock levels since the 1960s. S2: Drought in Brazil in 2014 Similarly, poor weather conditions caused uncertainty in crop production for the harvest year and pushed prices up. S3: Drought and frost in Brazil 2021 The effects of drought followed by a severe wave of frost in Brazil wiped out its coffee production. This was accompanied by increased freight costs and shipment issues caused by Covid-19. S4: Harvest Conditions Evidently, weather conditions pose significant downside risks to the coffee supply. Moreover, occasional coffee leaf rust coupled with increasing demand has caused spikes in coffee prices. USD and Coffee Figure 3: ICF and DXY (Inverted) As with many commodities, coffee tends to move inversely with USD. This is especially so since most coffee contracts, like the ICF, are priced in USD. When the dollar rises, coffee becomes more expensive in non-USD terms and can cause international demand to fall, and vice versa. Figure 4: ICF and BRLUSD This relationship becomes more apparent when compared to BRLUSD. Our thought process: Local Brazilian producers and manufacturers traded these ICF contracts as a hedging tool. During the physical delivery of the beans, these market participants would then have to do a currency exchange. Consequently, the impact of BRLUSD rates would have a larger impact on them. Similar Coffee Futures Contract Figure 5: ICF and KC The two contacts’ underlying assets - arabica beans - have similar grading standards. Consequently, macroeconomic factors are likely to have similar impacts on the two contract prices. The prices between the two contracts exhibit a very strong positive correlation. We can then create a spread with ICF – Coffee C (KC) Futures Contract. Figure 6: ICF - KC ICF is quoted USD per bag for a contract size of 100 60kg bags, while KC is quoted USD cents per pound for a contract size of 37,500 lbs. We can then create a spread with ICF1!/60-KC1!/0.4536/100, by converting both contracts to the same base units. The spread setup indicates that KC generally trades at a premium compared to ICF. This could be attributed to several factors, a notable one being the higher liquidity preference investors tend to have for the KC contract, which might reflect a broader international preference. It is also worth noting that ICF requires Brazil-produced arabica beans, while KC comprises beans from other countries. This could explain the uncanny coincidence between the upside bias in spread movements (Figure 6) occurring in periods identified in Figure 2 – supply-side factors driven mainly from the Brazil side. Putting into Practice Enough has been said about coffee; you must be wondering how we then use this information to set up trades. Here are some ways for consideration. Case Study 1: Directional Driven By considering current macroeconomic factors on coffee, to express a “quieter” outlook on coffee, an investor could sell the ICF future contract (ICFH4). At the present level of 206.00, with a stop-loss above 219.00 – a conservative resistant line – it brings us a hypothetical maximum loss of 219.00-206.00 = 13.00 points. As shown in Figure 2, if ICF1! Reverts to major support line 124.55, a hypothetical gain of 206.00-124.55=81.45 points. Each ICF futures contract represents 100 bags; the value of each point move is USD100. However, as we approach the main harvest period for Brazil, May to Sep, it is of paramount importance for the investor to keep a watch for any potential hiccups that could negatively affect the harvest yield. Furthermore, this is likely to be a medium-term macro-driven strategy. Case Study 2: Spread Driven Regarding the ICF-KC spread currently trading at the upper bound, an investor with a bearish short-term view that the spread will trend downwards could sell ICF futures contract (ICFH4) and buy KC futures contracts (KCH4). At the present level of 206.00 and 169.95 for ICFH4 and KCH4, respectively. Following the formula above, the spread will be at –0.31336 points. Setting the resistance at the Fibonacci 50% ratio, we have a stop loss at -0.25, which brings us a hypothetical maximum loss of -0.25-(-0.31336) = 0.06336 points. Setting the support at the Fibonacci 38.2% ratio, we set our take profit at -0.40, which brings us a hypothetical gain of -0.31336-(-0.40) = 0.08664 points. The value of each point move in ICFH4 is USD100, while KCH4 is USD375. Conclusion There are various methods to create opportunities for investors, depending on how the investor would like to view the market or what other financial assets to pair up with coffee futures contracts. What we have covered in this article merely scrapes the tip of the iceberg, and we hope investors keep a creative mindset and explore other potential options. Disclaimer: The contents of this article are intended for information purposes only and do not constitute investment recommendations or advice. Nor are they used to promote any specific products or services. They serve as an integral part of a case study to demonstrate fundamental concepts in risk management under given market scenarios. A full version of the disclaimer is available in our profile description.
BMFBOVESPA:ICF1!Short
by inspirante
10
CORN - KEYLEVELS - 2DHere I am neutrally bullish, we see a (possible) double bottom, which if it breaks the next level of resistance, could bring buyers and even greater interest. On the other hand, we must take into account that this correction is normal for grain, taking into account that the situation in Ukraine has calmed down and grain exports have resumed, thus all that growth since the beginning of the war, has now been closed and completed by a correction. The price is also decreasing due to the fact that the grain harvest was done in August-September and the stocks are full, but with the time when we get closer to spring, the prices must rise again.
SKILLING:CORNLong
by sfc95
🌱 Soybean Technical Analysis (GrainStats)Soybean Fundamentals ( CBOT:ZSF2024 ) Soybean Harvest Progress 🚜➡️🌱 ▓▓▓▓▓▓▓▓▓▓▓▓░░░ 85% Export Inspections 🚢➡️🌎 1,890,227 Metric Tons ⬇️ 735,466 Metric Tons week vs. last week ⬇️ 1,030,191 Metric Tons this week vs. this week last year ⬇️ 372,103 Metric Tons this week vs. 5-year average Export Sales 22,259,064 Metric Tons (Cumulative, Current Marketing Year) ⬇️ 8,264,993 Metric Tons this week vs. this week last year Noteworthy News / Themes 🟢 Crush margins have re-bounded significantly due to the rally in Soybean Meal 🔴 It is still notably dry in Argentina and planting should be starting in full swing 🟢 US River levels have improved on the Mississippi river (barge freight down) Soybean Technicals Overall quite the sideways market with conflicting trends - one up and one down, with an inflection point coming up soon. Regardless, from a technical point of view, there is no trade in the middle of the range until any of the following levels get breached.👇 🟢 Upside Target: 13.31 🔴 Downside Targets: 12.97, 12.70
CBOT:ZSF2024
by GrainStats
KO EARNINGS CHART - SUGAR DRINKS Potential to see a decent sized exit pump. I would play it like this. IF earnings brings us down to like 43, BUY. IF earnings brings us up to 57-63, SELL. There are only two really short term trends I could find, they both trend down. The rejection trend is quite strong, I expect this stock, if it tops out, to top out around 71. But it's hard to say at this exact moment. Tomorrow we will know more. Be aware, there isn't much more room to the upside, but KO is a slow moving stock, so it could be a long way out. Long term projection is still bullish. There is support at 52-50, and you could see a movement from that number. I'd expect the biggest movement to occur, should earnings take us really negative. I would start to favor the topside.
NYSE:KO
by nicktussing77
10 Year Corn Projection (potentially)10yr Corn outlook: 1 thought (of many) on the potential course of the corn market for the next 10 years. I feel the job of the current market is to find a price high enough to ration future demand. Could be current price, 8.50, or 9.50. The potential is there for any of those numbers to mark a major swing high for Corn. The higher that mark is nearby, the more corn begins to ration future demand. The low found after a major high is made, could mark an area for the future multi year market structure. The market should remain very sensitive for another few years. Sensitive to world demand and production misses across the globe. There are many climate cycles coming ahead that could add to potential Ag production shortages. **Not a prediction, something to watch** At some point we return to a tighter, more defined market structure working low prices against the long term uptrend line… 4.50-5.25 ???
CBOT:ZC1!
by mtb1980
4
10 year Bean Projection (potentially)10yr Corn outlook: Potential course of the Bean market for the next 10 years. Previous inflationary markets have caused for the multi year market structure to step up in price ranges. Before that range is found, Beans will need to mark a pivot high enough to ration some future demand. The low found after a major high is made, could mark an area for the future multi year market structure. The market should remain very sensitive for another few years. Sensitive to world demand and production misses across the globe. There are many climate cycles coming ahead that could add to potential Ag production shortages. **Not a prediction, something to watch**
CBOT:ZS1!
by mtb1980
🌽 Corn Technical Analysis (GrainStats)Corn Fundamentals ( CBOT:ZCZ2023 ) Corn Harvest Progress 🚜➡️🌽 ▓▓▓▓▓▓▓▓▓░░░░░░ 59% Export Inspections 🚢➡️🌎 437,549 Metric Tons ⬇️ 29,055 Metric Tons week vs. last week ⬇️ 22,514 Metric Tons this week vs. this week last year ⬇️ 370,24 Metric Tons this week vs. 5-year average Export Sales 16,176,285 Metric Tons (Cumulative, Current Marketing Year) ⬆️ 2,753,396 Metric Tons this week vs. this week last year Noteworthy News / Themes 🟢 Argentina is behind pace on Corn planting (12% complete) 🟢 US River levels have improved on the Mississippi river (barge freight down) 🟢 Mexico purchased 117,200 metric tons in a flash sales news announcement 🔴 The US still has a +2 billion bushel carryout 🔴 Corn failed to stay above $5.00 futures 🟢 Dry forecast in Argentina 🔴 Wet forecast in Brazil Corn Technicals Corn couldn't settle above $5.00 for too long given the ample expected carryout being priced into the market in the middle of harvest. Consider the sales that were sold above $5.00 as a gift to the farmers and we hope farmers prices some bushels. Outside of this, there really isn't much to say anymore about this market except that after 3 years of a bull market, we're finally getting back to reality and reality in the grain market is quiet. Watch the following levels for now👇 🟢 Current Upside Target: 5.00 🔴 Current Downside Targets: 4.74, 4.675
CBOT:ZCZ2023
by GrainStats
Will soy reach a price of 53.49?As you can see, this increase is temporary in nature because the overall trend is still in a downtrend. So, my expectation for now is that soy prices will climb until they reach the daily resistance zone around 53.50 (as indicated by the red box drawn). It is anticipated that the price will experience a decline upon reaching this level because this zone can be considered quite strong since it hasn't been touched yet. This decline is supported by the fact that soy prices have broken the previous low of 52.08 and are expected to drop to the daily support zone around 50.47 to 50.17.
CBOT:ZL1!
by revotraders
4
WHEATF | Wheat Poised for a Rebound!👋 Good day, traders! 📈 After a two-month decline on the D1 chart, WHEATF has found support at the 540 level. Given its month-long accumulation phase and the completion of its downtrend, a breakout above the 587.75 resistance level could signal a rally towards target levels of 615.00, 660.00, 695.00, and 732.00. Consider buying entries around the 595.00-600.00 range, targeting potential profits of 3.3% to 23.0%, with a SL set at ~565.00. ✅ Give a 👍 if you're keen on more insightful and profitable trading ideas❗️ ❓ I'd love to hear your thoughts. What's your take on this? DISCLAIMER: This idea is purely informational and educational. It's not a trading recommendation. Each trader should analyze and make decisions based on this information independently.
FX:WHEATFLong
by Maxim_Lushnikov
Wheat and Fertilizer Futures: A Cash Cow for War Mongers In this layout I have Black Sea Wheat and Corn, Australian and Ukrainian Wheat, and 4 main Fertilizer (UREA) Futures. Conflict and Wars are good ways for Financial Institutions like Black Rock and State Street Corp oration to make a lot of money. What better way than to destroy the wheat fields/silos themselves and profit at the same time? These markets are built in blood and they are sitting on Advanced Fibonacci Blueprints showing who is really in control. Volatility may be seen as many Russia pulled out of the Black Sea Grain Deal. Wheat supplies will undergo straining for the foreseeable future.
CBOT:AUW1!Long
by MichaelBsul
November Soybeans Test 1300 The November soybean contract tested 1300 per bushel on Tuesday, trading all the way up to 1303 ½, before ultimately settling at 1296 ¾. The question is now - where do we go from here? Psychologically Significant Resistance Failing to close above 1300 means we failed to close above a psychologically significant resistance level at 1300. Moreover, we’ve previously identified 3-star resistance between 1294 and 1299 ¾. Because we closed within that resistance pocket, it’s possible that we test 1300 and beyond once again in Wednesday’s trading session. But what if we don’t? If the market corrects lower on the failure to trade through resistance, where do we find support? Previous Resistance Becoming Support If we reject higher prices in tomorrow’s trade, previous resistance between 1280 and 1285 ¼ should serve as the first line of defense. Meaning, that if we see prices sell off throughout the session on Wednesday, we should expect prices to bounce back somewhere between 1280 and 1285 ¼. If we cut through 1280 rapidly, the next sufficient support pocket may factor in near the 38.2% retracement level between the May 31st and July 24th price extremes - coming in around 1249-1250. The Bottom Line We are in the midst of a pivot in the November soybean contract. Tomorrow’s price action should provide guidance on the intermediate-term’s price trajectory. Last week’s USDA report was mostly supportive of the soybean complex, and export sales have performed well over the past 6 weeks. That said, net-exports remain lower than they were at this time last year, and global demand remains deflated. Pay close attention to tomorrow’s closing prices as they may indicate the direction of the trend over the next 2-4 weeks. Check out CME Group real-time data plans available on TradingView here: www.tradingview.com Disclaimers: CME Real-time Market Data help identify trading set-ups and express my market views. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com *Trade ideas cited above are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management under the market scenarios being discussed. They shall not be construed as investment recommendations or advice. Nor are they used to promote any specific products, or services. Futures trading involves substantial risk of loss and may not be suitable for all investors. Trading advice is based on information taken from trade and statistical services and other sources Blue Line Futures, LLC believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder. Past performance is not necessarily indicative of future results.
CBOT:ZSX2023
by Blue_Line_Futures