GOOD MORNING,
Prices performed well yesterday considering the negative comments for trade negotiations, as Trump states that talks with China may extend well into 2020. Not taking it lightly was the stock market, as the Dow dove over 400 pts. but came back for a close that was not as bad as midday price action. Sold out conditions and baked in negative rhetoric allowed prices in the soy complex to tread water along the bottom of recent trading ranges. This morning, China's chief diplomat stated that both the US and China must increase "strategic communications" and work towards a consensus. Beans are higher, continuing a small recovery bounce along with products.
As for corn, prices have consistently started to "act" better, with more short-covering noted on market pullbacks. A possible positive January final, production left in the fields combined with less competition from South America is allowing prices to steadily trade sideways. Additionally, there was some talk that Brazil corn inventories could be very tight due to the fact that they have been a very aggressive exporter of corn over the last six month which could leave them short supply on the feed side for their livestock herd. This now leaves Ukraine as the biggest world competitor for corn, with the US possibly factoring in as a more aggressive seller heading into 2020. On the negative side for corn were rumors that deliveries could occur, and today there are 129.
WEATHER
Neutral to bearish. Brazil is in great shape after a dry start, with Argentina beginning to verge a bit on a too dry scenario. Favorable conditions are called for Brazil over the next 7 days throughout the major growing areas. In the US, wet weather delays the remaining harvest for the Midwest. Some corn may be left in the fields until spring, and any beans left may be lost.
ANNOUNCEMENTS
2019/20 Brazil bean crop is about 88-90% planted vs. 93% year ago, and an 85% average. Mato Grosso and Parana planting has been completed while NE Brazil and far southern areas need to finish.
According to a Reuters poll, Brazilian farmers could plant an estimated 18 mln hectares of corn for 2019/20, which would be 3% more than a year ago. Total output is estimated at 101 mmt, or 1% larger than year ago, with the USDA estimate at 101 mmt.
Ukraine's Ag Ministry estimated 99.1% of all grains have been harvested, bringing the total to a record 74.7 mmt of grain.
DELIVERIES
meal: 319
soyoil; 658
corn: 129
CALLS
Calls are as follows:
Beans: 4-6 higher
Meal: 1.20-1.50 higher
Soyoil: 10-15 higher
Corn: 1/2 higher
Wheat: 2 1/2-3 higher
OUTSIDE MARKETS
Outside markets features a firmer crude oil market, recovering from its break this week to trade to $57.10/barrel. The US dollar trades down to 97.62. The stock market is up 160 pts.
TECH TALK
- March wheat corrects downward, bouncing off multiple previous tops at $5.22. The market has best support at multiple lows of $5.11, should we go there, and if so, would cover a short or try the long side of the market with a tight sell-stop.
- March corn is sideways now, with double tops at $3.85 and double lows at $3.73. Volumes are fairly low, which keeps prices range-bound. However, the recovery now reinforces the support level from $3.75-$3.77.
- Jan beans are trying to stabilize and think that prices will begin to congest from $8.65-$8.80. Turning point is for Jan beans to turn higher from lower, which calls for a trade over $8.82 key resistance.
- Jan meal makes the larger case for upward corrective activity trading higher from lower out of congestion trade from contract lows of $292.60. If needing to price something, this chart can easily rally back towards $300.00/$303.00.
- January soyoil also appears ready to trade higher setting three lows from 3011c to 3015c. If wanting to own this market, recent lows from 3011c-3015c is now solid support for a rally back to 3080c.
Key first support that has to hold to maintain upward price action:
March corn: $3.79
March wheat: $5.22
Jan beans: $8.68
Jan meal: $293.00
Jan soyoil: 3010c
Believe these are good points to cover shorts or try the long side.
JANUARY BEANS
The major direction is lower, and seems to have been traveling in 40c chunks of trade, ie on the upside from $9.20-$9.60, and as we notched lower from $9.00-$9.40, now $8.67-$9.00. Conditions are still deeply oversold at 21%, which now favors a larger correction. Recent lows still have to verify that they can hold, which is now from $8.67 1/2-$8.68 1/2. Given the oversold extremes and the shorts in place, any trade over trendline resistance which today crosses at $8.80 -$8.83 will trigger a larger correction. At this point, think that $8.65-$8.70 has been a fairly good consistent level of support for this market, and that we morph into a $8.65-$9.00 trade. If short, would take something off the table, and the rest in case we cross to the upside of $8.83.
TAGS – Feed Grains, Soy & Oilseeds, Wheat, North America
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