GOOD MORNING,
Funds were net sellers across the board yesterday on overbought concerns and the fact that for once beans could not turn the rally back to new contract highs. But all good bull markets need and deserve a break. Funds sold modest amounts across the board, not challenging current uptrends, but bringing markets down to healthier congestion levels. Overnight, prices back and filled most charts, including corn and soyoil to key support levels that have held for the morning.
December wheat futures trades led the way in terms of price weakness, but Egypt tendered after the close for 60,000 mt of wheat in a tender for Nov 10/20, with Polish offers said to be the best. Russian offers were previously the most competitive but prices have been rising, enabled by farmers holding more grain in elevators they’ve built in recent years. According to one news story, the analytical center RusAgroTrans estimates the capacity of elevators in Russia at 135 mmt, which is more than was available a decade ago.
WEATHER
-- The 6/10 day outlook is for isolated showers in the western Corn Belt, and mostly dry on Saturday. Harvest can proceed in the upper Midwest, with rains from the latest storm stalling harvesting in the Delta.
--Globally, concerns are mounting over continued dryness. Weather conditions for winter grain sowing in Ukraine are said to be the worst in the last 10 years due to ongoing drought. Argentina is also suffering from dryness in their wheat growing areas. Brazil has also trended drier than normal as they begin their planting season.
ANNOUNCEMENTS
The French agency AgriMer cut their 20/21 soft wheat ending stocks to 2.9 mmt vs. 3.0 mmt in 19/20. They also lowered their 20/21 soft wheat exports outside the EU to 6.6 mmt, down 1.15 mmt from the previous.
Ukraine's APK-Inform lowered 2020 grain harvest production to 71.31 mmt, down 1.7 mmt from month ago. The corn harvest was lowered to 35.1 mmt, down 2.1 mmt vs. prev. Wheat was increased by 300,000 mt to 25.5 mmt.
Several China-based grain analysts suggested that the string of typhoons that hit the country may have taken up to 10 mmt of corn out of production in the northeast, or nearly 4%.
CALLS
Calls are as follows:
beans: 4-6 higher
meal: 3.00-3.30 higher
soyoil: 5-10 higher
corn: 1/2 lower
wheat: 3 1/2-4 lower
OUTSIDE MARKETS
Stocks higher, up 140 pts, with crude oil rising to $39.42/barrel. The US dollar trades down to 92.79.
TECH TALK
- November beans corrected some of its overbought extremes with a trade to $9.85, which held in the PM trade. Would look for continued consolidation now from $9.80-$10.10. The ability to bounce from $9.85 shows that the sell-off was a correction in a bull market, so trade back over $10.00 is likely still.
- December meal prices sold off to $317.90, after triggering sell-stops under $320.00, but also held for higher trade. Prices could rally again from $320.00 to test $328.00 with the bounce off the corrective price action.
- December soyoil hit a new trading range high yesterday at 3471c before entering a round of profit-taking. Trade back to 3390c tests the top of the pennant break-out, and therefore is a buying opportunity in a market that may continue to test 35c. Grains bounce off key support levels as well.
- Dec. corn trades close to the 200-day moving average of $3.61, and would expect this level to offer continuing good support in a market that has yet to back away from its new high of $3.71. Expect to possibly see another test of $3.69 again.
- Dec. wheat hits a key support level at $5.33 and has thus far held above it. However, if one market goes south expect that it would be this one, with a lower bottom target in play at $5.12 with a stop at $5.25, the lowest end of the trading range so far.
DECEMBER CORN
Prices are seeking a value trading range, which appears for the moment to be from $3.55 to $3.71. The market is trading in an uptrend channel, and until the channel is broken with trade underneath the path of least resistance is higher. Strong support sits at the 200-day moving average of $3.61, which also converges with the lower channel support lines. The market also has the slight appearance of forming a head and shoulders top, but the formation is in the very early stages. However, it is noteworthy in case prices begin to move sideways from higher. Overall trading range for now is $3.55 to possible highs of $3.75.
TAGS – Feed Grains, Soy & Oilseeds, Wheat, North America
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