GOOD MORNING,
The week is going to head into trading range highs and lows with price action dominated by ideas surrounding the January 'final' USDA WASDE report. Also to be released is the Quarterly stocks as of Dec. 1, along with the USDA monthly updates on US and world supply and demand. Calls today are mixed, as oilshare regains its footing, and what appears to be more buy bean/sell corn trade.
First up is the report with the signing of the US / China trade deal not far behind. Traders are looking for more clarity on the shopping list by China. For this week, bean export inspections yesterday showed a total of 5 cargoes of beans headed to China, 3 out of the Gulf and 2 off the PNW. As to future Chinese purchases, this morning China stated that they would not increase its annual low-tariff import quotas for corn, wheat, and rice, as reported by local media group Caixin, seen as an effort to protect domestic farmers.
WEATHER
US weather remains mostly normal, with above normal temperatures and mostly dry conditions in the west. Mostly dry weather moved through the east on Wed. Favorable weather remains for beans in the growing areas of Brazil except in Rio Grande do Sul, where more rain would benefit developing beans. Mostly favorable weather dominated for areas of central Argentina.
REPORTS
Commitment-of-trader's report as of 12/31, which showed the following:
beans: net short 3159
meal: net short 25,410
soyoil: net long 112,183
corn: net short 82,456
wheat: net long 26,270
Longs still hold 25% of total open interest in soyoil, making it vulnerable to a correction. Funds could go long beans, given that they have covered their short. Would look for further buy bean/sell corn trade based off the current positions as designated above.
ANNOUNCEMENTS
China's reserve management agency announced it would release 20,000 mt of frozen pork into market channels on Jan 9.
Brazil's Animal Protein Association estimated that during 2019, pork exports totaled 750,300 mt, up 16% vs. the prior year, and a new record. China purchased the most, taking 248,800 mt in 2019, or 33% of the total, and up 61% from 2018.
DELIVERIES
beans: 90 ABN AMRO stopped 87
meal: 843
soyoil: 312
CALLS
Calls today are as follows:
beans: 1-2 lower
meal: 80-1.00 lower
soyoil: 15-20 higher
corn: 1/2-1 lower
wheat: 2-3 lower
OUTSIDE MARKETS
Outside markets are quieter with crude trading down to $62.30/barrel, and the US dollar trading firmer to 96.85. Stocks are modestly higher, up 18 pts.
TECH TALK
- March soyoil prices place double lows at 3450c, with the chart forming a potential top. If at any time a gap lower trade develops, it could leave a large island top which is a sell signal. For now, will go with a wide trading range from 3450c to 3550c, using 35c as a pivot level. The strong trend still suggests that one could be a buyer at 3450c until we drop and settle underneath.
- March meal holds onto $301.00 as major support, and remains sideways from $301.00-$310.00. However, if more buy soyoil/sell meal trade returns, look for meal rallies to come to a quick halt.
- March beans are trading range bound with key support at $9.33, a pivot point in a wider $9.15-$9.60 trading range. With the major trend higher and funds even, would be covering partial shorts on breaks down towards $9.35.
- March wheat is sideways and begins the day by testing key support at $5.45. Major support is $5.40, and sell-stops are likely positioned under this level.
MARCH CORN
In the big picture, the trading range is from $3.71-$3.91 and the market lost its upside momentum with the break of $3.85, key support to fall under the slight uptrend channel. The drop in price reinforces resistance in the $3.88 - $3.90 level and could imply that lower prices are still ahead. The ADX is still trending weak at 14, meaning follow-through is hard to come by at each end. However, rallies may now invite more selling interest, and the market could begin to form a new downtrend channel that results in a test of $3.80 by report time.
TAGS – Feed Grains, Soy & Oilseeds, Wheat, North America
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