World Perspectives
feed-grains soy-oilseeds wheat

AM Outlook - Bean Bull Profit-taking; Corn Bear Short-covering

GOOD MORNING, 

Prices inched higher this morning with beans, corn, and wheat hitting new highs for the move up.   Wheat is in the lead today.  Good weather continues to be balanced off by the current pace of bean buying from China.  Reports from the country still point to good crops and plenty of production, while political tensions flare between China and the US.  The demand pull from China for beans has driven November beans back over the $9.00 mark, but they may have trouble sustaining that level in lieu of rising negative rhetoric.  Still, the nearby bean basis continues to head higher as commercials await new supplies from harvest.  Nearby bean spreads remain strong, with August /Nov hitting a 6 1/4c inverse, (as a reminder, July/Nov inverted to 9c).  Corn spreads weaken this AM.

In the latest tensions between China/US, China announced that in retaliation for the US order to shut down China's Houston consulate for spying operations, they have ordered the US to shut its Chengdu based consulate.  

WEATHER

Weather next week appears to offer a bit of a drier and cooler weather pattern, which is also good for crops.  The 6/10- and 8-14-day maps are leaning towards a dryer stretch, with conditions still pollinating under good circumstances.  Rains may cross this weekend into drier parts of western Iowa where they are badly needed.  Gist of the weather for now is bearish.

ANNOUNCEMENTS

Brazil's Celeres forecast 20/21 bean production at 130.8 mmt, with planted acres at 38.2 mln hectares, up 1.3 mln hectares vs. the prior season.  Brazil corn production was forecast at 111.5 mmt, with planted acres at 19.4 mln hectares.  The season begins Sep. 1.

China has accelerated grains for FH 2020, and may fully use its annual quotas for corn and wheat imports for the first time ever.  According to Chinese customs data, China imported 3.66 mmt of corn from January to June, 51% of its annual quota for the grain set at 7.2 mmt.  Wheat imports came at 3.35 mmt, 35% of its yearly quota at 9.64 mmt.   Last year China only used 67% of its annual quota for corn, and 1/3 of its wheat quota.

As of July 16, China has booked 6.1 mmt of US beans for the 20/21 marketing year that begins Sep. 1, according to the USDA, which would be China's largest volume of new-crop beans for the date since 2014.

FranceAgriMer cut its corn crop rating to 81% good/excellent vs. 82% week earlier and above year  ago at 67%.  

CALLS

Calls are as follows:

beans:  mixed/firm

meal:  .20-3.0 lower

soyoil:  10-14 higher

corn:  steady/firm

wheat: 4-5 higher

What to look for today?  Funds are long beans and the trade has been mixed.  Look for some profit-taking from the bean bull, and perhaps more short-covering from the corn bear.  Wheat and soyoil may continue to see strength give the strong price action. 

OUTSIDE MARKETS

Crude is in the green at $41.67/barrel, with the US dollar weakening to 94.57.  Gold futures are lower, down to $1884.30/oz.  Stocks are down 89 pts.

TECH TALK

  • November bean prices continue to work higher, building on gains and in the process fortifying lower support at $8.85 while testing key upper resistance levels of $9.02.  Path of least resistance remains higher, and prices are back over $9.00.  Next key resistance is $9.09/$9.10 with a pit-stop at $9.05.  
  • December meal prices trade over trendline resistance at $297.00 which sent prices to the upside of a pennant formation, nearly closing an open gap at $299.50.   Dec. meal also trades over the 100-day moving average of $298.80.  Next resistance is $301.60 provided Dec. meal can work its way to trade over $299.50 and completely fill in this overhead gap.    
  • December soyoil trades back down towards 30c, and the chart now appears to have set a temporary top at 3106c.  Would look for a pullback to 2965c as a buying opportunity for a market that could work upward again.  
  • December corn futures could not break $3.30, getting "sold-out" at that level and in need of higher prices.  The $3.33 level inserts itself again as key support and would look for corn to trend towards $3.39/$3.40 as prices are locked and loaded in a tight sideways pattern.  
  • Sep. wheat futures builds on gains after corrective price action targeted $5.18, returning key support once more to $5.20/$5.22 in a trading range that still extends up to $5.50.  Look for sideways trade and for the market to begin to swing 10-15c either side of $5.35.  

DECEMBER MEAL

Prices were congesting at the bottom of a trading range that was from $287.50 ctr lows up to $308.00 at the top.  Since July, price direction has been higher courtesy of a green uptrend line at the lows, and minor resistance lines in green at the top.    One can see the prices break-out to the upside of this green triangle formation about 3/4 of the way through, which is typical when the pennant or triangle is fully formed and works.  The bottom line of support is stronger as it has been around for longer, and prices continue to trade up and away from key support lines which is typical of markets that want to move higher.   Could continue to straddle or strangle $295.00-$305.00 with options, with an upside exit given the constructive chart pattern.  

ON THE CALENDAR

August options expire at close of day.  Cattle-on-feed will be released at 2:00 PM central time.    

 

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