Dollar Index
We have been looking for evidence of a top in the Dollar index the past few weeks. The dollar index saw a large sell off from July until the end of September. As the markets were front running the anticipated Fed rate cuts. Once the September Fed meeting was behind us the Dollar had a slight pause and then what I would call a relief rally during a period where the Fed did not have a meeting and press release.
Friday’s trade in the dollar put in an outside day reversal higher. So, we expect a few days of follow through higher in the dollar early in the week, looking for the 105.15 level to be a place for a possible reversal lower. Likely happening after the Fed press release on the 7th.
The market is anticipating a 25-basis point cut. If the 105.15 level can be a point of resistance, then we are expecting the dollar to begin to roll over. Some technical analysts are projecting a move well below the 100-index level. The dollar has been a torn in the side of grains during the month of October, closing higher 15 days out of 23.
We need to get the election, and federal reserve meeting behind us for the global money flows to begin to bail on the dollar.
On a side note, 2024 has been notable in the number of elections there are around the globe. More than 100 countries held elections in 2024, more than half the worlds population.
Corn Futures:
Early in the trading week we will be watching the 3.99 level closely. We are O.K. with the idea that corn can etch out one more new low below the 4.10 level on a short-term basis early in the week, it is possible that we don’t, but we won’t be alarmed if it does.
We won’t want to see a strong break of the 3.99 level. It will then open the door to the 3.85 low and then risk that some of the wave counts we are following are at risk of delaying the bullish market another few months.
Looking at the daily chart below you can see price action is back above the cloud and we closed right on the 100-day moving average last week. One of the byproducts of prices getting stalled out near the 4.00 level is that the technical get a chance to reset at lower price levels. For example, the first time we tested the 100 days. It was at 4.29 level. Now today the 100 day is at 4.145. It does not take as much effort for the market to cross the 100 days at the 4.145 level than the 4.29. Another example is the cloud chart. Corn struggled to get the through the top of the cloud the first test. A month later and now corn futures are above the cloud and is no longer resistance and now can act as support.
Post Harvest Outlook
Now that harvest has wrapped up, and many of you are meeting with lenders with inventory numbers and are asking. “Where do we see prices going from here?”.
Base case we see a path to springtime highs in corn and soybeans ($4.80 corn/ $12.20 soybeans) being good targets to keep in mind between now and end of February/ beginning of March. During this timeframe we will be able to get much of the globes export business, especially if our view on the dollar can come to fruition. Once we get towards the end of February Brazil is in harvest mode for their soybeans and that starts to put pressure on our grain markets.
These price levels also represent what we believe are numbers where the American farmer can begin to forecast some black ink on a Corn/Soybean crop farm. Using average/slightly above average yield projections.
There will be price targets along the way where we will utilize to help manage cash flow for the 2024 crop sales, so stay engaged and keep an open mind about these markets.
Many in the trade are convinced that we will be in a 2014-2020 type environment, but we just don’t see it that way after 50% of the U.S. currency was printed from 2020-2022. The cost for just about every product out there has seen an increase. This has and effect on grain production across the globe.
Soybean Complex:
Soybeans are caught between the Soy oil market breaking out to the upside and the meal market making new multi-year lows.
First addressing the meal market, it appears it has entered a capitulation phase. We are looking to a target of 288-278/ton that could mark a bottom. Since soybean meal is 80% of the processed soybean, we will need this market to finish its blow out. Everyone likes to see “the funds” get punished. Look no further than meal, they held a large, long position at the beginning of the month and price for meal has been getting punished.
We have been nibbling at getting coverage for our hog producers as prices have declined, but we will be booking for a longer term once we get closer to the downside targets.
Soybean Oil
Soybean oil has caught a bid in the global markets. India was back in buying U.S. soybean oil. I went back to see when the last time was that they were buying soybean oil from us. And I didn’t see any commitments from them since 2022. Soy oil is now one of the cheapest veg oils in the world. Typically palm oil takes this place. But soy oil has been lagging in the price rallies in the veg oil markets.
We expect to see continued strength in the soy oil market up to the 50-cent mark. However, longer term we could see prices test the 70-cent level over the next 12-18 months. Last week we sent out an update to our website subscribers about Indonesia raising their benchmark biodiesel to B40 from B35 in 2025. This along with other countries around the world implementing similar policy will keep a bid for veg oils.
On to soybeans, it will be a telling sign on if soybeans break the 10.08 level or the recent low at 9.77. Now that we have the November board futures roll behind us along with the U.S. soybean harvest. We feel that even IF the 9.77 low is broken we should not get too bearish. We will continue to look towards our based case of challenging our spring time highs as the next major move of significance.
Many of you took advantage of our sell targets at the beginning of the month. And used those targets to price out some of the bushels at the elevator. Most bushels have been cashed out at the elevator now and have been converted into the futures accounts.
Few reasons why we do this:
- Cost savings: the cost of rolling futures at a elevator will typically run 3-5 cents per bushel. In the accounts its under 2 cents.
- Margin requirements: An elevator will advance you only 70% of the cash price, holding 30% for margin requirements. In the futures accounts you can usually get positions put on for only 10% margin. So you are able to have more cash on hand putting the positions on in the futures account.
Long term monthly chart shows a clear 5 wave pattern down from the 2023 high. We don’t want to see the low at 9.36 taken for several reasons. But one being that the 5-wave count that we can count will be discarded because the wave 3 cannot be the smallest wave. Right now, wave 5 (the selloff from May) is the smallest wave. If we are correct in the count, then a 50-61.8% retracement of the 2022. Selloff over the next 12-18 months should not come as a shock and would suggest that getting bearish. “down here” could prove to be costly.
Disclaimer
Trading futures and options involves substantial risk and is not suitable for all investors. Past performance is not indicative of future results. Always consider your financial situation and consult with a financial advisor before making any investment decisions.
