GOOD MORNING,
The rising soy complex on Thursday was led by meal, which rebounded on technical consideration and news that Argentina's largest meal exporter, Vicentin, was in financial distress and having payment restructuring issues. This company is Argentina's number one exporter of soybean products and therefore, any loss in that location favors a gain in another, in this case the US. The rally in meal set in motion a sharp sell-off in oilshare, as oil bulls liquidated against rising meal prices.
Traders seemed to be caught off guard, with estimated positions still showing the futures / options funds short 40K meal vs. a 60K long in soyoil. Bean rallies are typically off the back of meal shortages, which led to buy-stops on the upside as prices strengthened throughout the day. Crush values continue to firm. US meal basis is steady, with Brazilian meal basis firming as well. This morning the rally continues with higher prices across the board. Grains are trying to keep up but lag the pace.
On the trade war news front, China indicated that they would again waive import tariffs for beans and pork as a goodwill gesture in negotiations, with the quantities of each exempted commodity unknown. The clock continues to tick against the Dec. 15 deadline when Washington is set to impose 15% tariffs on another $160 bln in Chinese imports.
WEATHER
Brazilian weather remains favorable but the market is watching for signs of further dryness in Argentina. Weather has turned slightly bullish from neutral.
REPORTS
Stats Canada released the following 2019/20 numbers:
All Wheat: 32.348 mmt (vs. an expected 32.5 mmt and 32.49 mmt in Sep.)
Canola: 18.649 mmt (vs. an expected 19.6 mmt and 19.36 mmt in Sep.)
The report was neutral for wheat but bullish for canola, which came in lighter than expected.
ANNOUNCEMENTS:
Head of the US EPA says they are working to address biofuel blending mandate concerns. The agency head also said they expect to send the 2020 proposal for biofuel to the Office of Management and Budget by the end of the week.
Argentina's BA grain Exchange forecast bean planting progress to more than 49%, and 48.7% complete for corn.
China's Stats Bureau estimated production as follows:
Overall Grain: 663.84 mmt, up 5.9% from year ago, yields 1.8% higher than last season, offsetting a decline in planted acres.
Beans: 18.10 mmt, up 13.3% vs. year ago at 15.95 mmt
Wheat: 133.59 mmt, up 1.6% vs. year ago at 131.43 mmt
DELIVERIES
Corn: 63
Meal: 148
Soyoil: 711
CALLS
Calls are as follows:
beans: 5-7 higher
meal: 1.80-2.00 higher
soyoil: 20-25 higher
corn: 1 higher
wheat: 1 1/2-2 higher
OUTSIDE MARKETS
Outside markets feature a weaker crude oil market which trades down to $57.87/barrel, and a slightly firmer US dollar which trades to 97.46. The stock market is up 50 pts.
What to look for today? Since it is Friday, would look for recent bulls to be lightening up and for shorts to still search for places to cover. Beans are closer to high side targets while grains appear susceptible to more weakness.
TECH TALK
- March corn remains sideways from $3.73-$3.85, and continues to put in congestive trade from $3.75-$3.77. Corn continues to appear labored on any move to the upside, which could signal further weakness. Until the market can rally over $3.85, it will continue to disappoint the bull, trapped in a sideways to possibly lower range.
- March wheat trades back to test $5.22, the pivot point in a wider $5.05-$5.45 trading range. Wheat prices also appear ready to see possibly lower price action, and returning to pivot points ($5.22 March) eventually breaks them.
- Jan beans correct further heading up towards key resistance from $8.95/$9.00, while March beans target $9.10/$9.15, which could become the top end of the trading range.
- Jan meal popped off the contract lows of $292.60 to show its upward trajectory towards the high end of the range, which could be from $305.00/$308.00, but also approaches the 100-day moving average of $304.00.
- Jan soyoil futures target 31c in solid trade and seems on target for a 30c-32c trading range attempt. Could straddle/strangle this market as another break towards 30c for Jan soyoil successfully held.
MARCH BEANS
Overall trading range is from $8.80 up to $9.15/$9.20. The oversold conditions in this market are slowly being alleviated. Pullbacks may now provide opportunities for further short-covering in lieu of the bounce from double lows at $8.82 1/2. Would also note that the chart is bumping up against some stiff resistance at $9.08/$9.10, which may bring some selling interest as well. If long, would probably be lightening up at this point though on a further rally the market will face better resistance from $9.20-$9.25 where the 100 and 200 -day moving averages are located.
TAGS – Feed Grains, Soy & Oilseeds, Wheat, North America
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