World Perspectives
farm-inputs wheat

AM Outlook - Overbought?

GOOD MORNING,

Prices are higher across the board this morning as beans and soyoil place new contract highs for the week, continuing strong up-trends.  Crude oil is firmer, which underpins the soyoil market, though Asian values are a bit lower this AM.  Higher world vegoil markets in turn support beans.  Slowing Argentine crush and tax/currency issues slow farmer selling for that country, lending support to beans.  And in the big picture, there are ideas that new money is coming into the Ag space as ending stocks tighten and weather worries persist.   

Jan beans encounter another round of technical buying that takes prices towards the $12.00 target, while Dec soyoil is closing in on its upper target at 40c.  Corn is once again a follower, but is also back at new contract highs.  Wheat is trying its best to hold together at the bottom of its current trading range.  Funds were sellers on Thursday, but appear to be buying back what they sold today.  The Commitment-of-Traders report will tighten up positions, but funds are now long an estimated 257K contracts of corn, 19K wheat, and 250K beans.  They are also holding an estimated long 90K soyoil position, as well as an 80K meal.

These continue to be demand led markets.  US corn export sales yesterday were 1.088 mmt, bringing their commitment to a near record large 12.0-13.0 mmt vs. USDA projection for China's total corn imports at 13.0 mmt.  Some analysts look for much higher numbers than this.  Chatter continues about purchased bean and corn cargoes this week, with weekly bean export sales above expectations in yesterday's report.  Chinese bean commitment now stands at a record large 28.6 mmt.  Record large crush numbers will find the market competing for bean supplies to fulfill crush and export numbers.  

WEATHER

--Better beneficial rain fell this week in Brazil bringing relief to southern Brazil and some to the needed relief in Parana.  Rains will shift into Argentina next before another rain system shows in the following week.  Brazil and Argentina's 6-day forecast calls for rains in the dry areas of south Brazil and Northern Argentina before a drier pattern asserts itself again.  Talk of continuing dryness in Mato Grosso with a drying trend into the first part of December, and some saying this is the driest trend in 40 years.   

--US forecasts for rains to cross the Southern Plains, which is creating pressure for KC wheat futures.  

ANNOUNCEMENTS

Argentina's BA Exchange sees Argy bean planting at 28.8% complete, up 16% on the week and trailing last year's pace by 2.5%.  Improved conditions were noted for parts of the Pampas while pointing out other wide areas were dry.  For beans, weekly rainfall aided the planting of the 20/21 campaign across a projected area of 17.2 mln ha, with some registering an advance of 16 percentage points WOW.

 

Ukraine has harvested 60.3 mmt of grain from 14.6 mln hectares, or 95% of the sown areas as of Nov 19, as reported by the economic ministry.

French farmers have sown 95% of the expected soft wheat areas for next year's harvest as of Nov 16, as reported by FranceAgriMer.

CALLS

Calls are as follows:

beans:  14-17 higher

meal:  4.50-$5.00 higher

soyoil:  30-35 higher

corn: 3 1/2-4 1/2 higher

wheat:  4 1/2-5 1/2 higher

OUTSIDE MARKETS

Firmer crude at $41/51/barrel; and firmer US dollar at 82.2.  Equities are mixed with Dow off 45 pts. and the NASDAQ up 10 pts.  

TECH TALK

  • Jan beans march higher towards $12.00 with overbought conditions in tow at 78%.  New contract highs were noted again as the break to $11.60 held and prices were able to quickly recover.  The high today is up against trendline resistance from $11.95-$12.00, and would look for this level to be tested, but it could hold on overbought extremes at 78% alone.  
  • Dec meal heads back towards $401.10, and would look for new ctr highs here as well given morning strength.  
  • Dec soyoil posts a new contract high at 3932c, on its way to head towards the key target at 40c with a stop at 3950c.  Top trendline resistance for Dec soyoil is 40c should we go there, and conditions are overbought at 75%.  
  • The soy complex values continue strong without a reversal as of yet.  Tops are not defined.  
  • Dec corn prices trend higher testing previous contract highs at $4.28 1/2 and could easily move past double highs to target $4.35/$4.40.  
  • Dec wheat is a continued sideways trade from $5.80-$6.15.  Would look for Dec wheat to head towards $6.15 on short-covering with the inability to follow-through on breaks of size.  A very strong line of resistance is forming which crosses today at $5.98.  Once again, wheat closed into this level, but would have to trade over it to see upside correction.  

MARCH CORN

The major direction is higher with the recent high at $4.35 3/4 and a trading range low established at $4.08.   The market established recent support at a higher level of trade at $4.24, and prices are now in the process of moving up towards $4.35 again.  Since the major trend is higher, would look for prices to eventually test $4.35, as well as $4.40.  The market here is not overbought, and would own good breaks back towards $4.20/$4.24 where good end-user pricing ideas are probably located.  

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