GOOD MORNING,
Prices Friday were defensive as the US/Iran conflict created impacts across stocks and commodities. Trade talk in the grain market was that the escalation of tensions by Iran / US could spill-over into trade negotiations between the US/China and impact a signing date, or far worse, a trade deal altogether. Besides soybeans, which were visibly affected with a quick sell-off, KC and Minn. wheat markets were down twice as much as Chicago, as China would be looking to buy from those markets primarily. The only market to escape the liquidation day Friday was soyoil, which held in like a champ with a close still over 35c in the March contracts. This morning, soyoil futures are lower along with beans. Beans are weaker, but supported by the fact that the Chinese delegation has confirmed they are traveling to the US for a signing ceremony on January 15, as reported by the South China Morning Post.
This week marks the much-awaited 10 January USDA report. Aside from the peripheral markets, the USDA statistics will provide better clarity for how large the crops are for corn and beans, considering what was never harvested last season. This is the report that usually brings fireworks. Funds remain short corn, slightly short beans and meal, heavily long soyoil, and modestly long wheat.
WEATHER
Favorable weather continues for developing and pod-filling in beans in central Brazil. More rain would benefit beans in southern Brazil. There is an improving rainfall pattern for soybeans in northeast Brazil. Weather continues to be neutral to bearish for SA. Informa estimated Brazil bean production at 125.6 mmt, and Argentina at 54 mmt.
US weather is dry in the west through Wed., and in the east mostly dry as well. Temperatures are variable.
ANNOUNCEMENTS
Bulgarian vet officials acknowledged an outbreak of African Swine Fever in the northeastern part of the country, with around 24,0000 hogs to be culled.
Argentina's wheat registrations for Dec totaled 1.73 mmt, double Dec. 2018.
DELIVERIES
Beans: 214
Soyoil: 282
Meal: 1357
CALLS
Calls are mixed to begin the day as we head into Friday's January WASDE. Expect more position evening into that report with Friday's break starting the process of defining a trading range heading into the numbers. In that regard, oilshare is seeing some profit-taking with meal firmer against weaker soyoil, and beans slightly lower against corn. Corn may have the firmest trade today as it holds the largest short:
beans: 1-2 lower
meal; .20-.30 higher
soyoil; 50-60 lower
corn: 1/2 lower
wheat: 3-5 lower
OUTSIDE MARKETS
Outside markets feature a firmer crude oil market, which trades up to $64.72/barrel, and a weaker US dollar at 96.54. Gold is at a 7 yr high on geopolitical tensions, trading up to $1580/oz. The stock market is down 172 pts.
TECH TALK
- March corn has been trapped from $3.85-$3.92, and is sitting today on top of its 20/50/100 day moving averages snuggled between $3.84-$3.86 1/2. The ADX trend is 16, extremely weak, implying that follow-through to one side or the other remains extremely weak. However, the break lower seemed to be easier than the rally over $3.90, which could not get past $3.92, so at this point resistance is stronger than support given the trade back under $3.86.
- March beans has the best support at $9.33, a level that has been both resistance and support. Look to head into a probable $9.33-$9.55 trading range into the Jan. data, with $9.33 a 38% retracement of the recent rally.
- March meal hits the lower end of the trading range, but has very strong support at $300.00, with a recent bottom at $295.00. If needing to price or want to day trade from the long side, could do so with a tight sell-stop under $299.00.
- March soyoil corrects away from its contract high at 3657c to trade back under 35c towards recent lows at 3440c. Key support here is 3438c, and any trade under this level now suggests that a larger correction is coming that could at least fill in the gap at 3429c.
- March wheat has the best support under the market at $5.40, now the lower end of a $5.40-$5.65 trading range and is congesting from $5.45-$5.50. If long, would be cautious here as it appears that the chart could have set a temporary top heading into the numbers Friday.
MARCH BEANS
Overall the trading range is from $9.15 at the bottom up to $9.61, the high trade from last week. The steep sell-off was sharp enough to call $9.61 a temporary top in a market that probably will move sideways into Friday's report. The strength of the bean market can be now measured in how far it pulls-back. Since it appears as though a temporary top is in place, could do a Fib. retracement from the lows at $8.83 up to $9.61:
38% - $9.33
50% - 9.20
62% - 9.12
The rally in beans has been strong, and if the market cannot even test the 38% level on weakness this week, would suggest that higher prices could still be on the way. If short, would be scale down covering towards $9.33, and if wanting to get long could try it with a close sell-stop nearby.
TAGS – Feed Grains, Soy & Oilseeds, Wheat, North America
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