World Perspectives
feed-grains soy-oilseeds wheat

AM Outlook - Mixed Ahead of Crop Conditions

GOOD MORNING,

Prices are mixed today as crop ratings will be released at 3:00 PM central time, and they are expected to show stable to perhaps better ratings for corn and beans.  Ideas continue to float that China may purchase more bean and corn contracts.  Tight supplies of domestic corn in China continue, and ideas are that China will continue to purchase US beans if trade tensions do not return.  US, Russian, and Argentine farmers are slow sellers.   

Corn:  Nearby corn spreads are trending weaker as good weather brings the potential for higher yields.    Chinese corn prices continue to firm as their domestic reserves are tight, and auctions continue on a weekly basis.  There is chatter that China will need to buy more corn.   The September (Chinese) Dalian contract traded to new highs, reflecting the tight domestic situation, with prices up 15% from the start of the year.   

Beans:  Good weather continues to generate talk of record yields.  China continues to buy beans, which support the market.  China's bean imports in June from Brazil hit a record high, according to customs data, as hog herds recover.  Traders wonder if Chinese buying from the US will match what has happened in Brazil.  

Wheat:   French production continues lower.  US wheat exports are running 5% ahead of year ago.  Agritel estimated the 2020 French wheat crop production at 29.33 mmt, down 26% from year ago.  Poor yields and lower acreage on the back of poor weather will produce the lower crop.   

WEATHER

US: Hot weather was pervasive over the weekend but a cool front will break the heat and bring cooler but drier conditions for this coming Monday - Friday.  Temperatures will moderate as rains cross Neb., Iowa, Ill., Mo., and Ind.   Isolated showers will cross the Delta this week.  Soil moisture is adequate for now, but some dryness in the north may be concerning.  Parts of Iowa and Neb. still need more rainfall.   Good Midwest weather is bearish for prices this week.   

World: Heavy rains continue to batter parts of southern China.   Showers and storms are forecast along the regions in the lower reaches of the Yangtze River until Tuesday afternoon, the China Meteorological Administration said Monday.  Heavy rains could worsen a severe flooding situation since early June, hindering construction activity which hurts steel demand and metals, such as iron-ore futures in China.

REPORTS

Commitment-of-trader's report disaggregated futures / options:

beans:  long 75,908 (from 65,974 new longs added)

meal:  net short 29,178 (from 30,451)

soyoil:  net long 36,897 (from 10,198, adding new longs)

corn:  net short 137,770 (from net short 133,625, new shorts added)

wheat:  net long 474 (from net short 8,327 week earlier, with the addition of outright new longs).

The commitment-of-trader's report, (COT) was in line with expectations.  Funds continue to remain net long beans, (Chinese demand), vs. a net short corn position, (lower demand, struggling ethanol, good growing conditions).  

Cattle-on-Feed:

July 1 cattle-on-feed:  100% vs. estimate of 100%

Marketings:  101% of year ago estimate of 101%

placements: 102% vs. 104% expected

Report was largely neutral.

ANNOUNCEMENTS

Brazil's Arc Mercosul forecast the safrinha corn crop at 55% harvested vs. 71% year ago.

China's June wheat imports were 893,696 tons, up threefold, while corn imports were at 881,593 tons, up 23%.  

Customs data showed China's June bean imports are 11,160,249 tons, a record volume.  The total included 10.51 mmt of Brazilian beans, and 267,553 mt of US origin.  China's June soyoil imports were 140,201 tons, more than double a month ago.

Russia's IKAR forecast 2020 wheat production higher at 78 mmt vs. 76.5 mmt due to higher yields in some areas.  Russia's wheat export prices rose for the third week as farmers in southern regions were slow to ship out the new crop.  

CALLS

Calls are as follows:

beans:  1/2-1 higher

meal:  1.80-2.00 higher

soyoil:  30-35 lower

corn:  mixed

wheat:  5-7 lower

OUTSIDE MARKETS

Gold at new record highs of $1938/oz, not seen since 2011.  Crude trades to $41.71/barrel with the US dollar trading to new lows of 93.70.  The stock market is up 128 pts.  

TECH TALK

  • November beans are trading sideways from $8.70-$9.10, but struggle to stay over the $9.00 level.  Trendline support today crosses at $8.93, so breaking $8.90 would make the chart appear toppy.  If a bean bull, need to keep the $8.93/$8.95 intact in order to avoid a larger correction back into the middle of the trading range. 
  • December meal prices closed an open gap at $299.50 last week leading to the next key resistance level of $301.60 which is trendline resistance.  If long would probably take something off the table given the price increase. 
  • December soyoil continues in retreat testing the 30c level.  Expect to find sell-stops on a break of 30c that will target 2980c first, with better lower support at 2965c.  If short and the market trades to 2965c, would cover something and try the long side. 
  • December corn meets a line of resistance from $3.35/$3.38, and any trade over this level will invite more short-covering.  Could also be short against $3.40 for a continued downward trade back towards $3.30. 
  • September wheat trades back towards key support at $5.30.  A break of $5.30 would find prices targeting the 100-day moving average line of $5.23.  If short, would take off part of a position from $5.23-$5.30, as the market was able to hold this level last week for a move higher.  

DECEMBER CORN

Overriding direction is sideways with an ADX reading at 16, meaning that there is not much follow-through at either end of the trading range. Prices remain trapped from $3.30-$3.40.  The overhead gap remains unfilled from $3.42-$3.44, which is key resistance now on a rally.  The triangle formation continues to find prices trapped within its boundaries, but any trade over the top of the triangle and above $3.38 would be positive, offering a chance to fill the gap.  Could straddle/strangle the market from $3.30-$3.45.  

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