Grain Spreads: Tariff Euphoria

Question: Was Tuesday's spike low to 841 in July beans and 338 in July corn a pre-summer seasonal bottom or is another retest of these levels a possibility down the road? Since Tuesday's spike lows corn is up 16 cents, beans up 48 cents, and Chicago wheat up 21 cents. I'm not sure how these tariff threats play out as unpredictability with both China and the US reigns. Weather will be the ultimate bellwether on future yields down the road and then price. We are supply side driven as corn and beans are in the ground. The tariff talk is simply an example of a Black Swan demand event entering into the market. Funds and specs alike exited en masse while open interest declined for both Monday and Tuesdays decline signalling liquidation. Funds are at or near neutral awaiting new inputs to long or short corn and beans in my view. Common thinking would have some kind of bounce into month and quarter end next Friday. We still have 6 trading sessions until that day which is highlighted by the quarterly acreage report. Last quarters planting reports showed surprise cuts in corn and bean acres and should we come in near the same with out any major adjustments higher, would most likely be report day friendly. Lots of noise regarding Ag tariffs and trade but at the end of the day beans are needed for both human and animal consumption in the world biggest populace. I doubt the Chinese let Brazil raise their basis to levels requiring China to buy beans above the board for any length of time. The Chinese have never operated that way. To me they have always leveraged buying from the USA vs. buying from Brazil, cancelling sales for future shipment with the US when they can buy from Brazil at a cheaper price. This tactic has been in China's playbook for years and is bearish from a demand perspective to the US producer. To me this is what needs to change with any new trade deal that may be agreed to in the future between both countries. Until then weather dominates.

Technical's come in as follows for the remainder of the week:

Corn (July)-support is at 346.47. A close under and 339 is next. A close under and its down to 3.25. Resistance is up at 358. A close over and its up to 372.

Beans (Nov) Support 906. A close below and its down to 882. A close under and its 860 and then 842. Resistance is up at 931.4 and 940.

Wheat (July) support at 478.6. A close under and the next level is 461.6. a close under that and 445.6 is next. Resistance is 490.4. A close over and 5.10 is next then 532.2.

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