GOOD MORNING,

Prices are mixed this morning post report as there were not enough changes in the Jan. final to call for a change in trend.   Instead, what we may find is a change in spread trade, particularly as we enter the start of a new growing season.  The last few months offered a market where beans gained on corn, and given a neutral carry-out in both, the trend may now be for beans to lose a bit to corn.  It is probably the mission of the corn market to maintain a steady trade as planting begins in a month or two down the road, while beans may begin to feel the pressure of a South American harvest that appears robust.  

Support on bean breaks will come courtesy of the Phase One deal signing on Jan. 15, and all eyes will be on export sales after that.  To begin the day beans are lower vs. corn.

In terms of overall commitments, prices could swing anywhere as funds are about even in beans, while drawing down some of their net short corn position.   The corn Quarterly Stocks report was friendly, as despite a larger production number, Dec 1 inventories were just 11.389 bln bu vs. 12.0 bln bu year ago and under the expected 11.5 bln bu., the result of strong domestic feed and/residual demand.  The core length resides in soyoil, where funds are still over 100K contracts long, and own 24.4% of the total open interest.  Typically, when funds have more than 20% of total open interest it is time for housecleaning. Post report, funds are taking some of those profits in soyoil off the table.  

Commitment-of-trader's (COT) as of Jan 7 disaggregated futures / options combined in ctrs:  

beans: net long 1,159 

meal:  net short 27,914 

soyoil:  net long 110,862 

corn:  net short 80,887

wheat:  net long 10,168

WEATHER

Mostly favorable weather for developing and filling beans in the major growing areas of Brazil except in Rio Grande do Sul where more rainfall would be beneficial.  Drier weather has returned to northeast Brazil after recent rainfall with some crop losses due to hot and dry weather in the major growing areas of central Argentina.

ANNOUNCEMENTS

Export prices for Russian wheat reached a season's high last week due to firmer CBOT prices, a stronger ruble, demand from Egypt, and weather-related concerns with the 2020 Black Sea crop.  Russian wheat areas have been warm and dry. 

Brazil's Safras & Mercado estimated 2019/20 bean production at 123.6 mmt, down from 125.5 mmt in Dec.  Acres are estimated at 37.0 mln.  They estimated Brazil corn production at 103.2 mmt, down from 104.10 mmt in Dec, and vs. 107.4 mmt year ago.  

Ukraine's Ag Ministry estimated the 2019 grain harvest at 75 mmt vs. 70 mmt in 2018.

CALLS

Calls today are as follows:

beans:  4-6 lower

meal:  80-1.20 lower

soyoil:  25-30 lower

corn:  1/2 higher

wheat:  2 1/2-3 lower

OUTSIDE MARKETS

Outside markets feature a firmer crude oil market, which is trading up to $59.27/barrel, and a lower gold market down $3.00 to $1551.50/oz.  

TECH TALK

March beans now sit in sideways trade and its time to watch whether funds want to sell strength.   Prices could continue to wander back and forth from $9.33 - $9.55, but any violation of $9.33 is a sell signal.  

The March soyoil chart was beginning to build in a line of resistance failing from 3505c down to 3490c when it finally filled in its open gap at 3429c and is now trying to find support.  Given the size of length in this market, think the market could break 34c and test the next best level of support which is from 3355c to 3380c.  

March meal remains vulnerable to further lows having traded just below $300.00 last week.  The violation of support could find the market looking at $297.00-$298.00 once again, which probably depends on bean direction.  

March corn tested $3.76, which proved to be a value level.  Prices moved again into the 100-day moving average of $3.87, and we begin the day right there.  Think that at this point, pullbacks may find buying interest, and if beans fall would think that corn may drift lower but hold.  March wheat still is operating at the upper end of its recent highs of $5.68 1/2, and would prefer to still buy breaks in this market as the consistent price action to hold and a rally suggests that new highs could still be ahead.  

MARCH BEANS

Given the USDA report and a 475 mln bu carry-out, the price direction for beans is likely to stay in the well-defined area between $9.33 lows and the recent high of $9.61.  The major direction is sideways, and funds are even.   Prices may begin to drift lower, however, given that Brazil is on the doorstep of harvesting a large crop, so if funds begin to sell strength then the market may go down to test $9.33.  

Any exit to the downside of that price would invite funds to sell the market again, as there is not much support underneath until moving averages are reached between $9.21 and $9.26.   Prices may continue to bounce around into the signing and perhaps a few weeks of export sales to see if business is transacted that would require a higher trade.

TAGS – Feed Grains, Soy & Oilseeds, Wheat, North America