GOOD MORNING,
Finally, the day of signing is here for the Phase One deal. US Trade Rep Lighthizer and US Sec. Mnuchin said that all parts of the phase one deal will be made public today, with the event taking place at 10:30 Chicago time. Specifics on commodities may remain murky at best, with traders probably not getting all the answers to the question of how much will be purchased, and in what time frame. Speculation of future business continues to underpin beans, even though Brazil beans are cheaper right now than US. Still, headlines from the likes of Commerzbank that stated that "China's high bean imports for the month of December could be a taste of things to come in the next few months" makes it difficult to be a bean bear.
Major market trends in the past week remain the same, which includes firm wheat. Wheat made a new high for its move up as funds continue to get longer. The possible export restrictions from Russia support the market, and the strikes that are hitting France’s transportation system is also net positive for non-French wheat. In all of this, interesting to note that Egypt tendered for wheat, and purchased a combination of 240,000 mt of Russian and Romanian origin. Nonetheless, prices did not react to the fact that the US was excluded, continuing its technical trend upward.
WEATHER
Weather for the most part of Brazil remains good, with more beneficial rainfall developing in Rio Grande do Sul. Favorable weather remains for beans in central Brazil. Dry weather has returned to northeast Brazil, increasing stress on beans. Crop losses are expected in this region due to long periods of hot and dry weather. Weather for now is neutral to bearish.
ANNOUNCEMENTS
China will release 30,000 mt of frozen pork from its state reserves on Jan 17, one week before the start of the Lunar New Year celebrations.
The head of China's Ag Ministry dept of markets and information suggested 2020 bean imports could rise above the 2019 level of 88.51 mmt.
World animal health organization stated that Romania has reported an H5N8 bird flu outbreak, found in a region in the north near the Ukraine and Hungary borders.
Chinese media noted that Brazil made its first chicken shipment to China this week.
DELIVERIES
beans: 36
meal: 217
soyoil: 113
CALLS
Calls today are as follows:
beans: 2 1/2-3 lower
meal: .20-.50 higher
soyoil: 25-30 lower
corn: 1/2 higher
wheat: 4-6 higher
OUTSIDE MARKETS
Crude oil is weaker breaking to $57.84/barrel, with the US dollar weaker at 97.23. The Dow is off 24 pts.
TECH TALK
- The March soyoil chart appears to have now set a major top, with prices breaking from the highs of 3567c to test major support at 3350c. Would note that a Fib retracement from the contract highs and lows last summer puts it at 38% at 33c. The market must trade back over 3445c to negate the topping pattern.
- March beans continue to trend sideways, but for the day follows soyoil prices lower as funds are even and in a holding pattern. However, returning to market lows is never a sign of strength, as stronger markets work up and away from key support (ie, wheat trade right now).
- March meal continues its sideways pattern from $295.00-$307.00, having placed another spike peak yesterday at $307.00 with lower prices today, which makes the chart more vulnerable to a new low rather than a new rally high.
- March corn continues to congest above $3.85 atop coinciding moving averages from $3.86-$3.87. The weak ADX trend at only 13 suggests that prices remain stuck, but shorts may also be looking at small breaks to opt out of the market.
- March wheat continues to maintain a well bid posture, making new highs and holding breaks on small setbacks. Target highs are pushed back to $5.80 as a result.
MARCH WHEAT
The trend remains higher with all the characteristics of a bull market, with rising open interest, new highs. and larger volumes. Trendline resistance for the day moves back towards $5.76/$5.80 and support moves up to $5.50. Upper targets include $6.00 given the strong ADX trend of 39, meaning pullbacks will now hold. For now, there is not a signal to tell us that the uptrend is finished, but would probably take partial profits along the uptrend line on the top of the chart. The cautious climb higher finds the chart only slightly overbought at 66%, which is not enough to suggest that housecleaning is necessary. Would consider the new trading range higher from $5.40 - $5.80 (possible high) given the price activity and trend.
TAGS – Feed Grains, Soy & Oilseeds, Wheat, North America
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