World Perspectives
feed-grains

AM Outlook - Grains Over Beans

GOOD MORNING,

Prices started the PM session lower with corn prices slowly recovering led by wheat.    Harvest proceeds forward as trading volumes are light.  China is on holiday this week for Golden Week, which will add to fund control.  Egypt announced an October 5 deadline for 30,000 mt of soyoil and 10,000 mt of sunflower oil.

Beans continue to lose more vs. corn, trading into five-month lows.  Lower bean prices may suggest to the farmer to plant more corn next year.  The bean /corn ratio may slowly have the mission now to tick up in favor of corn given the USDA Sep 30 stocks number and better harvest potential for beans. A 250 mln bu bean carry-out is comfortable as is the rising stocks-to-use ratio.    The slow buying activity from China as crush plants are shutdown and the bottlenecks at the Gulf impact price remain bearish for both corn and beans.  

Corn continues to put in a slightly better performance vs. soy, as higher input costs are supportive for prices.   However, Chinese buying remains slow.  Additionally, the EU and Ukraine are harvesting corn, and the latter may prove to be an issue as they will compete with US origin.  

WEATHER

--Rains throughout the Midwest interrupted fieldwork over the weekend.  Frequent rains fell from Arkansas through Tennessee, while areas in the lower Delta were dry.  The western Corn Belt was dry.  Recent rainfall was good for HRW areas, but more rains will be needed later this month.

--Argentina saw scattered rainfall and more concerns are building for areas.   Brazil saw good rainfall amounts in Mato Grosso do Sul, and other areas are also seeing beneficial rainfall amounts.  

Gist of the weather is bearish.

REPORTS

US census crush at 168.23 mln bu vs. 165.0 mln bu in July.  Soyoil ending stocks at 2.183 bns lbs was higher than 2.140 bln lbs in July.  Meal stocks tightened to 344,741 vs. 442,290 st in July.  

Commitment-of-Traders report disaggregated futures / options combined in contracts:

beans:  net long 59,311

soyoil:  net long 47,490

meal:  net short 14,964 

corn:  net long 244,741

wheat:  net short 9,815

No surprises for the COT though the beans were a bit longer than expected.  

ANNOUNCEMENTS

Brazil exported 4.83 mmt beans in Sep vs. 4.26 mmt year ago.  Corn exports were 2.855 vs. 6.371 mmt.  

Strategie Grains increased its monthly forecast for this year's rapeseed harvest to 17.03 mmt from 16.93 mln.  The latest estimate would be 2.4% over 2020's output of 16.61 mmt, it said.  

Canada's smallest canola harvest in 13 years is forcing importers such as Japan and Mexico to pay more or look to other countries, or purchasing alternatives such as palm or soyoil.

Russian grain analysts forecast Russia's winter wheat planted acres down by 0.5 to 1.2 mln hectares from the 17.8 mln ha planted last season.  

CALLS

Calls are as follows:

beans:  8-10 lower

meal:  .80-.1.50 lower

soyoil:  40-50 pts lower

corn:  2-3 lower

wheat:  steady

Stocks started the PM session down 30 pts. with crude oil trading down to $75.32/barre with the US dollar at 93.76.

TECH TALK  

  • November bean direction is sideways/lower, with prices now trading under $12.40 which is weaker.  There is no reversal signal, and it appears that small rallies are now being sold.  Resistance moves down to $12.65/$12.70 as new lows are printed.  Target lows are now $12.25/$12.30.  The market is not terribly oversold at 35% but the ADX is strengthening at 23%, meaning that it is becoming more advantageous to sell rallies as the market prints new lows.   
  • December meal prices also trend to new lows at $325.80, as resistance now moves down to $335.00/$338.00.  Target lows are $320.00.   
  • The December soyoil chart is still constructive trading from 5750c to 5950c.  Target high is still 60c.  Would continue to own pullbacks, particularly any break towards 55c to 56c, as we are in a trading range from 55c-60c, continuing to pivot around 58c.
  • December corn is in a large sideways range from $5.25 - $5.55, pivoting around the middle at $5.35.  The 100-day moving average and visual trendline resistance converge at $5.48, and represents therefore a very tough level to trade above.  Trendline support is located at $5.30/$5.32 and this line looks more break-able than not.  
  • December wheat trades in the upper portion of its range from $7.00-$7.60, pivoting around $7.25/$7.30.  Dec wheat places a new high at $7.59, with prices slightly lower than this level.  However, the pullback is shallow, and therefore we could still place another new high at any point.  Target high is now $7.75/$7.80.

DECEMBER WHEAT

The major direction is higher with many constructive formations, including trading to the upside of a fairly wide uptrend channel, as outlined in blue, to continue on to new trading range highs this AM at $7.59.  The market is neither overbot nor oversold with an RSI of 55%, and funds are a small net short.  The ADX remains weak at 13, despite the uptrend.  Now that prices have passed interim resistance at $7.50, there is not much to stop a rally towards the last peak high at $7.78/$7.80, and pullbacks to $7.35/$7.40 could see support.  Would look for the possibility of moving into a $7.50-$7.80 trading range high before a more significant price break occurs.  By the same token, with an ADX of only 13, if long may want to also take something off the books.

ON THE CALENDAR

Export inspections out at 10:00 central and crop progress at 3:00 PM ...........

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