GOOD MORNING,
The wheat and soyoil markets took center stage this week advancing to new highs for their trading ranges. Chicago wheat continues to be a technical affair, as shorts continue to feel the pinch of higher prices and technical resistance fails to hold.
This week's wheat rally can also be tied to the weaker US dollar, courtesy of the big money flows unwinding recent buy the US dollar/sell the British pound, among other currencies. Wheat and beans continue to gain on corn, which has put in rather compact trade after achieving its target high based off bullish formation patterns, and the Dec wheat/corn spread has rallied nearly 32c.
While there is plenty of world wheat, the focus of the market is on the more friendly fundamentals, which include a severe Australian drought, and spring wheat that may not be harvested with the major storm last weekend. Dec wheat continues to challenge the $5.30 level, but once the short-covering stops, the fall may be just as dramatic.
To begin the day, grains are lower while the soy complex is higher. The commitment-of-trader's report will be released after the close, with an estimated 115K short in corn, 35K long in beans, 40K long in soyoil, short in soyoil, and now probably even in wheat.
WEATHER
The US is dry this week before scattered rains surface this weekend, with the 11/15-day forecasts drier as well. Not all areas will see weekend rainfall, but wet areas of the Dakotas and Minnesota continue to look wet. Both Brazil and Argentina have drier forecasts for the 6/10-day outlook, but wetter after that. Those rains will certainly need to materialize, as the planting season remains behind.
Export sales were released today and were good for beans, but poor for everything else. Pork sales were a marketing year high. It was reported that China was an active buyer of new crop Brazilian beans this week. Nearby Brazilian FOB offers firmed back after the recent slide from +110 Nov in mid-Sep. to +70 Nov this week. US beans are on par with Brazilian bean values landed in China.
ANNOUNCEMENT
One analyst put out estimated acreage numbers for 2020:
- Beans: 85.3 mln acres vs. 76.4 this year, trend yield at 51.3 bpa vs. 46.9 bpa this year, and production at 4.3 bln bu vs. 3.5 bln bu this year
- Corn: 95.2 mln acres vs. 89.9 this year, trend yield at 178.5 bpa vs. 168.4 bpa this year, and production at 15.6 bln bu vs. 13.7 bln this year
- Wheat: 44.7 mln acres vs. 45.1 this year, trend yield at 50.0 bpa vs. 41.6 bpa this year, and production at 1.9 bln bu vs. 1.962 bln this year
China produced 31.8 mmt of pork in the first 9 months of the year, down 17% from the same period a year ago.
Australia's wheat production is forecast at 15.5 mmt, according to the National Australian Bank, vs. 19 mmt earlier.
Argentine wheat yield losses continue to rise due to drought, with yield losses up to 40% in areas of Cordoba, La Pampa, and BA.
Philippines report an additional case of ASF.
CALLS
Calls are as follows:
beans: 1 1/2-2 higher
meal: .20-.40 higher
soyoil: 1-3 higher
corn: 2 1/2 lower
wheat: 2 1/2-3 lower
OUTSIDE MARKETS
Outside markets include firmer crude oil, trading up to $54.62/barrel, and a weaker US dollar, which trades down to 97.43. The Dow is up 17 pts.
TECH TALK
- Dec wheat prices hit new highs overnight at $5.26 1/2, with $5.25/$5.27 first key resistance. The up-trend continues to strengthen, and therefore pullbacks may be viewed as a buying opportunity. Expect a test of $5.15 eventually, and the first time we get there we may bounce off of it. Trade over $5.27 targets $5.45, as there is not much in between to stop an advance.
- Dec corn consolidates from $3.90-$4.02 and has established enough lows from $3.89-$3.90 that any break below it would favor a larger pullback towards $3.83-$3.85.
- Nov beans are beginning to form resistance from the top of the chart, with highs from $9.38-$9.42, and crossing lines of support at $9.25 offering good support. Would look to continue the consolidation pattern from $9.25-$9.40 today.
- Dec meal bounces off lower support at $303.00 as the major trend is sideways from $301.00-$315.00. On strength, would look to head towards $309.00, which is a swing point.
- Dec soyoil hit new trading range highs of 3076c, and has been back and filling since that time. Overhead resistance is 31c, and this rally does not appear to be finished, just stalled in consolidation mode.
DECEMBER WHEAT
Major trend is higher as the market approaches key resistance at $5.27. While prices are heading towards overbought, the ADX is strengthening, meaning pullbacks may now be viewed as buying opportunities. Would look for a break to $5.15/$5.20 to now turn into a first support buying opportunity. On the chart, any trade past $5.30 shows the only resistance would be located at the peak top of $5.45 should we go there. If wanting to sell, would have to put a buy-stop just above $5.30, as there is virtually air in between $5.30 and $5.45. As of this writing, the market still remains well bid which favors a test of $5.30.
TAGS – Feed Grains, Soy & Oilseeds, Wheat, North America
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