GOOD MORNING,

Futures were mixed overnight, with profit-taking in oilshare and corn prices drifting lower.  Corn has become the sell leg again for spread activity as dictated by weaker chart price action.  

Futures continue to back and fill and stay in trading range territory in front of Friday's important January report.  The major expectation is that the US yield and harvested acreage will see total production heading lower for both corn and beans, so the measure is by how much, not if.  Quarterly Dec. 1 stocks will be released and are expected by the trade to be around 15% lower vs. a year ago.  The trade is not expecting many changes for Brazil or Argentine crops, but Australian wheat crops will continue to be ratcheted lower.  Dr. Cordonnier lowered his Brazil bean production estimate by 1 mmt to 122 mmt due to dry conditions in the NE and far south of the country.  He left Argentina unchanged at 52 mmt.  

WEATHER

Parts of SA are getting production reductions due to lack of rainfall in Brazil and Argentina.  Most of Brazil continues to see favorable weather in major growing areas except for Rio Grande do Sul, which has entered into a slight drought situation.  In the US, heavy rains continue across the eastern corn belt and the Ohio River Basin with 3-5" totals that will cause some flooding.  Weather for now is neutral to bearish for beans, neutral to a bit friendly for corn, as estimates in Brazil drift lower.

 STORIES

Argentina's Rosasio Bolsa will decide whether to cancel Vicentin's grain trading license if they have not paid their bills.  The company defaulted on payments in late Dec. and it is doubtful that they can source the financing, and could be looking to sell off assets.  

ANNOUNCEMENTS

China's sow herd rose 2.2% in Dec. vs. the prev. month according to a gov. minister Wed.  

Brazil's CONAB put out the following estimates for January production:

• Beans:  122.2 mmt vs. 121.1 mmt in Dec, and vs. 115 mmt in the 2018/19 season, outpacing US production for only the second time vs. the US.
• Soybean exports for Jan. were 36.798 mmt vs. prior report at 36.791 mmt.   
• Corn production is forecast to decline vs. year ago, growing only 98.7 mmt for 2019/20 for total production vs. 101.4 mmt year ago.
• First season corn is forecast at 26.6 mmt vs. 26.3 mmt in Dec.  Planting of the second season crop has just started and is forecast at 70.9 mmt.  

Brazil's agency DERAL noted the first 495 hectares of beans of the 2019/20 crop season have been harvested vs. 5% as of Jan 7, 2019.  The latest production forecast for the state of Parana is 19.7 mmt, just below the record 19.9 mmt collected in the 2016/17 crop year.

DELIVERIES

Meal:  574

Soyoil;  298

Soybeans:  258

BUSINESS

Egypt tendered for wheat, the first for 2020, for delivery in Feb.  USDA forecasts that Egypt will import 12.5 mmt of wheat for the 2019/20 marketing year, ahead of Indonesia at 11 mmt.  

CALLS

Calls this morning are mixed with meal higher vs. soyoil, (profit-taking in oilshare), and beans firmer against corn, which posted new lows this morning for the move down:

beans: steady/firm

meal;  80-1.00 higher

soyoil:  5-10 lower

corn;  1 lower

wheat: steady

OUTSIDE MARKETS

Outside markets features weaker crude which trades down to $61.31/barrel, and a firmer US dollar which trades up to 97.23.  Gold futures are slightly lower.

TECH TALK

• The major direction now comes from corn, where prices broke key support at $3.85 turning to the downside of a slight uptrend channel.   The chart is now vulnerable to a further sell-off towards $3.80, as funds have returned as net sellers into the report.  March corn has a trading range from $3.71 - $3.91, so a trade to $3.80 puts price action square in the middle.  If Friday's report is positive, it will also be the key to sending prices over previous tops at $3.92.  
• March wheat holds its ground in congestive trade from $5.45-$5.65, so would really consider this closer to values at the lower end of trading range activity, which is perhaps why it is seeing some support here.  Major support is $5.40, with sell-stops just below in case the report is negative.  
• March meal maintains a sideways trade from $300.00-$310.00, and pricing activity on breaks to $300.00 has helped this chart to maintain good support on the lows.  
• March soyoil is getting a bit interesting, testing 3440c with a series of lows which now, if broken, will increase the chance for gap-fill at 3429c.  The set-up is interesting as any gap-lower trade would put an island top in place, suggesting a further pullback would occur which would clean house with nearly 100K longs in tow.  
• March beans turn sideways from higher, trading in the upper levels of recent ranges.  Any trade under $9.33 would therefore tip the scale to the downside, and promote ideas that a temporary to is in place.   

MARCH BEANS

The overall trading range is from $9.15-$9.61, with recent price action nestled in between $9.35-$9.55.  Volumes have drifted off as prices trade sideways from higher.   The ADX reading of 19 designates a weak trend, meaning prices are trapped.  However, would say this chart is starting to turn suspiciously toppy, and with highs and lows so well defined a market break of $9.33 would become a sell signal and put a top in place.  Prices are remaining low enough now so that a bullish report may send prices back towards $9.60 again, but given the chart set-up it could prove a tough top to climb over.  If long, would probably consider booking a profit on a rally of size should we get one after the report, unless the numbers are shockingly bullish enough to result in a need to stay in the upper tier of trading range activity with a solid close over $9.55.  

TAGS – Feed Grains, Soy & Oilseeds, Wheat, North America