GOOD MORNING,

The market leader for the morning is once again wheat, which placed a new high for the move up in the PM session.  No doubt that this has become a very technical trade.   All other markets are firmer as well, but are content to wait until we see the January report before further defining their trading ranges.  Expectations are for corn and bean crops to be lowered, but the question is how aggressive will the USDA be?  Small adjustments may break the market down, while a fundamental shift downward will kick prices out of current ranges to the upside.   

Funds will enter the report with a 120K short in corn, even in beans, a small short in meal, a very large long position in soyoil (100K plus contracts), and a growing long in wheat of around an estimated 30K.  If the report is neutral/ negative, will funds cover their short position in corn hoping for a price increase when China goes shopping?  From the reaction of the wobbly bean market, which failed on its rally Thursday, bean bulls seem a bit skeptical with Brazil prices lower and more harvest on the way. 

WEATHER

Favorable weather still for developing and filling beans in the major growing areas of Brazil except for Rio Grande do Sul, which is hot and dry.  Scattered showers and storms during the next 7 days will favor Parana over Rio Grande do Sul.  Drier weather has returned to Brazil's northeast area of Bahia.  Crop losses may occur due to hot and dry weather in Dec.  More favorable weather is noted for corn and beans in Argentina.  

US weather features above normal temperatures, with more active rain systems in the east.  Gist of weather for now is neutral, but dry spots have to be monitored in Brazil.

REPORTS

Export sales:

Beans:  2019/20 net 355,542 mt and 2020/21 net 3,441 mt (vs. an expected 400-850)

Meal:    2019/20 net 74,235 mt (vs. an expected 75-250)

Soyoil:   2019/20 net 2,577 mt (vs. an expected 0-25)

Corn:    2019/20 net 161,888 mt  (vs. an expected 350-725)

Wheat:  2019/20 net 80,567 mt and 2020/21 net 50,000 mt  (vs. an expected 200-550)

Export sales were low end across the board, but mostly expected due to the holiday season.  However, the impact was to weigh on market direction.  

ANNOUNCEMENTS

AgroConsult forecasts Brazil bean exports to China for 2020 at an estimated 54 mmt with the China/US trade deal in place, and higher at 60 mmt if the deal were not to come to fruition.

Agroconsult forecast Brazil's 2019/20 bean production at 124.3 mmt, vs. Dec at 124.0 mmt, and vs. 118 mmt for 18/19.  

Argentina's BA Exchange pegged bean planting at 93.2%, vs. 84.3% week ago.  

DELIVERIES

Jan beans:  141

Jan soyoil:  354

Jan meal:  292

CALLS

Calls are as follows:

beans: mixed/lower

meal:  .50-.80 higher

soyoil:  3-8 higher

corn:  1/2 higher

wheat: 1 higher

OUTSIDE MARKETS

Outside markets include higher stocks, up 40 pts, while crude oil trades down to $59.22/barrel, with prices back below $60/barrel.  The US dollar trends weaker with prices at 97.37.  

TECH TALK

March wheat and soyoil markets continue to display bull market behavior, but are close to key resistance levels at $5.70 and 35c, respectively.  Trade over these levels will sponsor a new leg higher, and will trigger more fund buying.   

March bean prices are looking more vulnerable to further potential weakness and would not be surprised to see prices testing key support at $9.35 into the report.  

March corn prices now fail against the 100-day moving average of $3.87, which could also find prices breaking down towards $3.80 after the open.  

March bean prices are trading range bound from $9.35-$9.55.   Since the market is trading in the upper portion of its recent range, any break now below $9.33 is going to result in a larger sell-off back towards the lower end of the trading range, which is located at $9.15-$9.25.  Strong support is well defined at $9.35, which for now is the bottom of a range where the current peak high could still be tested.  

March corn prices begin a new uptrend channel, but at ranges lower than a week ago.  For the day, March corn support is located once again at $3.82 and resistance on the upside at $3.92.  Expect a very bullish report to result in a test of $3.92, at least given the fund short and the recent failed rally against the 100-day moving average of $3.87.  

March wheat places a new high at $5.65 1/2 this morning with major trendline resistance crossing at $5.70.  This market continues to display the stronger trade, along with soyoil.  

Soyoil and wheat charts look eerily similar as setbacks continue to hold with new highs placed.  March soyoil continues to congest from 3440c, a key support level in a market that could see clearance of contract highs at 3567c for a trade to 36c.  

March soyoil support continues to be well defined with a trading range now from 3440c - 3550c.  

March meal maintains a $295.00-$310.00 trading range, which one could straddle/strangle.  Pricing under $300.00 is recommended given chart recovery from this level.  

MARCH WHEAT

Wheat price direction has been grinding higher since last September, with steep pullbacks leading to recovery trade and higher values.  The ADX trend is strong at 36, meaning the uptrend will tend to hold on breaks, and setbacks should be owned.  The market price activity has been systematically stronger with pullbacks of 20c tending to hold.  The lower end of the market is $5.25 in a range yet to be defined at the top, though for the day major trendline resistance is located at $5.70, and it appears as though the market wants to go there.  

If prices trade to the upper trendline resistance of $5.70, would probably liquidate a portion of overall length, though have to keep the rest until a better reversal signal is in place.  So far, the last two days of buying has been fueled by positive tech signals, which includes an outside day closing higher, and the clearance of tops at $5.55.  Any close over $5.70 will result in a continued trade higher towards $5.80 to $6.00.

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