Overnight trends once again feature a slightly firmer soy complex versus mixed corn values. Funds purchased the board yesterday and appear ready to get long beans perhaps, as well as corn. Bean prices are probing further to the upside again this morning, extending gains on top of Tuesday's reversal activity. To be sure, we are trading weather, trade negotiations, and USDA report data. The last reports have been surprises that caught funds leaning the wrong way, so will this report do the same? It is the reason behind some of the housecleaning activity going on for the moment, i.e. lightening up on corn length while covering in bean shorts.
In the meantime, here are the general expectations for today's report:
- Lower corn and bean yields (to what degree is the question),
- Higher U.S. old crop supplies due to weaker exports, feed/residual and ethanol may see a small increase,
- Lower U.S. new crop wheat estimates, corn up fractionally, beans down,
- Lower world old crop stocks for wheat, corn and beans unchanged,
- Unchanged world new crop stocks for wheat, corn up and beans down.
Weather remains mostly good right now for crop development, but by the end of next week the Midwest probably needs continuing rainfall patterns. Heavy rains in the Gulf could extend up to the Midwest bringing continued moisture which is perfect for these later maturing crops. For now, the 6-10-day outlook shows warm and wet conditions throughout the Midwest.
Talks between U.S.-China continue as they consider scheduling the next round of talks in Beijing. At the end of the G20 summit, the U.S. said it will allow American companies to sell technology to the blacklisted telecommunications giant Huawei where there is no threat of national security. In the meantime, there is still no sign of agricultural purchases.
Strategie cuts corn harvest to 62.7 MMT vs. 63.4 MMT one month ago.
Russia's Agriculture Ministry forecast 2019/20 grain exports at 45.0 MMT versus 2018/19 at 43.3 MMT. 2019/20 wheat exports are forecast at 36.0 MMT up from 35.2 MMT in 2018/19, and 2019 production at 75.0 MMT.
China's Ag Ministry forecast their soybean production at 9.07 million hectares, and 2019/20 unchanged at 17.27 MMT.
China reported another African swine fever (ASF) outbreak in Hubei province, and lowered their overall corn consumption estimate to 280 MMT, off 2.0 MMT versus the previous outlook due to ASF. China also lowered their corn planted acreage estimate to 41.48 million hectares versus 41.63 MMT one month ago, and production at 253.44 MMT versus 254.35 MMT last month.
- soybeans: 214
- soyoil: 152
- meal: 40
- corn: 132
- wheat: 3
Calls are as follows:
- soybeans: 1-3 lower
- meal: 0.80-1.40 lower
- soyoil: 3-5 lower
- corn: 3-4 lower
- wheat: 1 1/2-2 lower
Cash values remain strong with spreads firming in the corn and bean markets.
Outside markets feature a still higher Dow, expecting interest rates to fall, and a weaker U.S. dollar which trades at 96.79. Crude trades to new highs at $60.94/barrel as the storm makes its way through the Gulf of Mexico and over New Orleans.
Dec corn price action is "heavy", with dead-cat bounces being sold as we drift between $4.20 - $4.50. Any trade under $4.20 goes for sell-stops which could take prices to the 100-day moving average of $4.08.
Nov beans turned higher from lower, with prices trading over key resistance at $9.10 which triggered buy-stops and a possible move up towards $9.20. However, with corn prices so "heavy", the bean and meal PM session highs may stand into the report. Support now moves up to $9.05 as resistance that could be tested moves up to $9.15/$9.18.
Dec meal also trades over its key moving average of $317.00 with good support at multiple tops at $315.00. The chart can run to the upside if we now take out key resistance at $317.00 as there is little back resistance to stop a move towards $320.00.
Dec soyoil charts look a bit more impressive, though price action remains choppy as we consistently post new highs only to turn and test the lower portion of trading ranges, which for now is well defined from 28c - 29c.
Sep wheat broke to new lows just under $5.00 at $4.98, but the price action has not been impressive with the downside seeming easier to work than the upside struggle for now.
These are very good levels of support levels today for the following markets. Sell-stops and violation of any of these levels will lead to another leg down:
- Dec corn: $4.20
- Sep wheat: $4.90
- Dec meal: $309.00, gap closure
- Dec soyoil: 28c
- Nov beans: $8.90
DECEMBER CORN: The chart still appears toppy in nature as we look to form a head and shoulder possible top. If confirmed suggests $3.80-4.00 is a target low. Trade now over multiple tops at the left of the chart over $4.55-4.58 negates the pattern. However, as we build in a bit of new resistance (top blue line), it is also notable that volume is declining (noted by the descending blue line in the black portion of this chart), which is a characteristic of a head and shoulders top. Good support is $4.20 and depending on the report we may get a defining moment as to whether we enter a large sideways trade or break prices down to the next level of key support which would be from $4.05-4.08. For the moment the chart pattern overall is more bearish than friendly. In that we are now forming new resistance at $4.45, a trade back over the upper blue line would suggest a break-down of this topping formation.