So where do we go from here? If the weather remains kind to the main crops in the Northern Hemisphere, we are likely going to see additional price pressure. Traders with basis-short positions will be ready to cover physical commitments as soon as bales become available, which would necessitate the selling of long hedges in New York.

The reduction of basis-long positions on the other hand is a slower process, as it takes time to make sales to mills. We could therefore see some harvest pressure in the weeks ahead and traders need to be mindful of the important 82 cents support level dating back to early February. If the market were to break below the June 3 low of 81.72 cents, it would likely open the door for substantial spec long liquidation and short selling that could force the market below 80 cents, at least temporarily.

If the weather doesn’t cooperate and crops suffer some last minute setbacks over the coming weeks, then the market may challenge resistance levels in the high 80s, although we feel that time is starting to run out for the bulls. We therefore see a sideways to slightly bearish scenario as the more likely in the foreseeable future.

Plexus