THE OPEN

Nov beans:  3 higher

Dec meal:    1.20 higher

Dec soyoil:   7 higher

Dec corn:     4 higher

Dec wheat:   5 1/2 higher

Prices opened higher as expected in what was a somewhat muted and cautious tone considering the solid day of trade yesterday, and positive China trade announcements this morning regarding beans and pork.  Major features in the soy complex included buy meal/sell soyoil trade with correcting oilshare values and buy bean/sell corn trade.  Volumes remained impressive as shorts elected to use setbacks to continue a short-covering phase post data and Chinese announcements.

SOY

• The soy complex opened quietly and remained well bid for most of the morning as more shorts were looking for a pullback to cover something in.   
• November beans opened on top of gains yesterday and remained well bid over $8.95 before technically adding gains over $9.00 to further new highs.   
• The constructive price action for beans spilled over into meal sending prices to new trading range highs as well, while Dec soyoil struggled on market rallies.  
• Nov crush traded down to 79c/bu as bean prices strengthened with oilshare moving down to new lows at 32.66 percent.  The nearby Nov/Jan bean spread firmed into 13c while Dec/March meal carries congested around the $5.00 benchmark.  
• Hedge pressure continued light for beans, which allowed for prices to continue to move to new highs with little effort.  The confirmation from China that it would exempt an unspecified amount of US beans from paying additional import taxes did manage to create a good house-cleaning rally and confirm sideways trade vs. lower trends, but the commitment-of-trader's report tonight is still expected to show a net short position, which must be dealt with considering the bump up in trading ranges this week.  
• The USDA confirmed a smaller than expected sale of 204,000 mt, but US beans remain much less expensive than Brazilian beans, as the latter nears the end of its current marketing year. 
• Weather in Brazil still appears dry, though the planting season has only just started.   Trading ranges have been notched up a bit, with Nov beans appearing to work into a possible $8.70-$9.15 trading range, with Dec meal reinforcing support near the $295.00 level for a possible $295.00-$310.00 trading range.  Dec soyoil could target 2945c and eventually trade up to 3025c.

GRAINS

• Grains moved higher but the leader of the pack today was wheat.  Buy wheat and beans/sell corn trade dominated spread action.  
• Still, Dec corn found a solid bid as prices worked towards the major support level of trade now identified as $3.65.  Buyers were able to put on adequate coverage at lower levels, meaning there was not much panic buying around as we hit the middle of the trading session.   
• Corn spreads were a touch weaker for the nearby with Dec/March trading from 12 1/4c out to 13c.  However, Dec 19/Dec 20 remained in the green trading into 35 3/4c from 40c.  
• KC wheat prices turned higher over $4.00 stabilizing recent price action and reinforcing support once again at that level, while Chicago wheat continued to find buyers sending prices to new highs for the recovery trade from the overall trading range low of $4.50 1/2.  Prices today suggest that the drop down to that level courtesy of unexpected deliveries may have created a trade that was overdone to the downside.  
• Possible Dec corn ranges include a $3.52 - $3.82 high, and Dec wheat could eventually challenge $5.00 for a $4.60-$4.95/$5.00 trading range.  In options trade, ADM purchased 200 $3.80 corn calls at 8 1/2c.  

AT MIDDAY THE MARKETS ARE AS FOLLOWS:

                                                     hi                             lo

Nov beans:  6 3/4                      9.03 1/2                    8.93

Dec meal:  3.00 higher            304.70                     300.60

Dec soyoil:  9 higher                2938                        2902

Dec corn:    1 3/4 higher          3.72 1/4                  3.65 1/2

Dec wheat:  4 higher                4.91                        4.83 1/4

Nov canola:  5.00 higher          453.90                    446.10

OUTSIDE MARKETS

The Dow opened 60 pts higher and continued to stay in the green into the noontime hour.  Crude oil sells off further to $54.44/barrel.  

CLOSING COMMENTS

The USDA report confirmed a lower carry-out for beans this week, lower yield, and lower production.  Today's announcement brings hope that future purchases from China will be coming, but skepticism abounds as prices move slowly over the $9.00 level in the Nov contract for the first time since July.   By contrast, corn still has to contend with competition from other origins and carry-outs remain ample.  However, this week's good technical corn activity and uptick in biz shows that corn in the $3.50's has value, and perhaps the August yield at 169.5 bpa could be the largest we see for the balance of the year.  

If China begins to purchase more beans at a time that Brazil is getting sold out and weather patterns dry, would look for the funds to begin to cover their shorts in a more earnest fashion.  But chart signals are not often wrong, and this week there were many positives overwhelming negative trade ideas.  

Technically speaking a good close today sets the market up for an outside week closing higher, and that could go against funds who remain net short across the board.  At the very least, the price action this week may invite more short-covering next week.   It doesn't take much to change the headwinds from negative to a bit more optimistic.    And they have been negative for a long time.

Have a good weekend...........

 

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