GOOD MORNING,
Funds continue to make adjustments into the end of the month and into the Thanksgiving holiday. Volumes are going to probably dwindle from here. Jan beans break $9.00, ignoring more of the bullish fundamentals such as a good round of export sales and crush demand. Funds are in liquidation mode, and prices are now at the lower end of the trading range for beans, with a good corrective pullback in soyoil futures. Feels like funds are prepared to be short everything but soyoil.
The Wall Street Journal reports that the Chinese have invited US representatives Mnuchin and Lighthizer to Beijing for a sit down meeting before the Thanksgiving holiday. While it may be a good story, funds are not buying it. The US wants China to indicate that they will deal on IP protection, forced tech transfer, and ag purchase commitments. President Xi stated that they want to avoid a trade war, but are also not afraid to retaliate if necessary. The deadline for the next set of tariffs are due to go up on Dec 15. The clock is ticking.
December contracts continue to liquidate or get rolled forward with first notice day next Friday, November 29. Corn volume represented about 50% spread activity, as Dec/March continues to trade from 10c-11 1/2c. Corn and beans should continue to be more competitive moving forward. U.S. soybeans will have about 60 days of good export activity before harvest supplies come on board again from South America.
WEATHER
Warmer but wetter conditions will dominate for the Midwest, with a rainfall system crossing the middle of the country. South America is the weather watcher's focus right now and conditions are presently neutral. However, Argentina continues to show a dry pattern and could use more rainfall.
ANNOUNCEMENTS
Argentina's BA Exchange increased their bean planting estimate for Argentina by 100,000 hectares to 17.7 mln with those acres switching away from corn planting due to dry concerns. 2019/20 corn planted acres are now forecast at 6.3 mln hectares, down from the prior forecast of 6.4 mln ha.
China's breeding sow inventory increased by 0.6% in Oct, the first monthly increase in the sow herd since April 2018, according to Chinese figures. The entire hog herd was down 0.6%, the smallest month-on-month fall in a year.
A heating oil shortage is developing in Canada as the CN RR strike enters its third day, with shippers scrambling to shift freight to trucks.
STORIES
Politico website reports that the Trump administration is looking at potential new trade investigations against the European Union.
CALLS
Calls today are as follows:
beans: 1 1/2-2 lower
meal: .30-.80 lower
soyoil: 25-30 higher
corn: 1/2 lower
wheat: 2 1/2-3 higher
OUTSIDE MARKETS
Outside markets show a slightly weaker crude oil trade to $58.06/barrel, and a firmer US dollar at 98.04. The stock market is 49 pts higher.
TECH TALK
- March corn rallies to $3.80 but stops short and is barely off the new lows of $3.76 3/4. What are funds shooting for? Final target lows arrive at $3.66, a level we may see before a larger correction sets in.
- March wheat prices are sideways retracing the $5.00-$5.25 trading range with a weak trend at 12 meaning prices remain in chop mode. Interesting start as prices sit at recent lows of $5.11.
- Jan beans trade under $9.00 but if funds want to build a new short, the downside is probably not over. The first bottom targets starts at $8.94, and extreme target low is $8.80.
- Jan meal sinks back towards $301.00-$302.00 lows, and major trendline support for the day crosses at $301.50.
- January soyoil chart is getting interesting, forming what could be a head and shoulders top formation. There is good symmetry between the left and right shoulders, with the peak rally at 3212c forming the head. The neckline crosses at 3058c, and must be broken with a 3% close underneath to set off a sell signal. But should that happen, then moving averages well below the market at 2980c could be eventually attained. Fundamentals fly against the formation, but funds are extremely long and if we cross support to the downside, it could fuel a larger corrective sell-off. With meal at recent lows and soyoil forming what appears to be a top, one must be cautious about owning oilshare and get some defense on.
JANUARY SOYOIL
The uptrend has been intact for many months, and this is what makes a head and shoulders formation valid since one of the requirements is that it begins at the end of a long rise, or in the case of an inverted head and shoulders, after a long decline. If it's a true head and shoulders, a larger correction to the downside is coming, but would have to validate with a break of 3050c. Could sell before the break if the volume on this right shoulder begins to turn lower, also a sign that we are forming a top. If owning oilshare, this formation calls for caution. The only question now would be if there is a fundamental shift coming in lieu of this negative formation. A close over 3180c negates the pattern and suggests that prices remain in a sideways range.
TAGS – Feed Grains, Soy & Oilseeds, Wheat, North America
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