World Perspectives
feed-grains soy-oilseeds wheat

PM Post - Corn Bear Trap?

THE OPEN

March beans:  2 1/4 lower

March meal:  .20 lower

March soyoil:  25 lower

March corn:  2 1/2 higher

March wheat:  1 higher

The markets opened as called, though more weakness was noted for the soy complex at the start of the day.  Grains recovered, led by corn as new shorts yesterday elected to cover something in today, perhaps on the Senate's passage of the USMCA trade deal.   Buy corn/sell wheat and bean trade was noted, along with recovery trade in soyoil futures.  Profit taking on both sides seemed to be the theme of the day.  Corn continued its rally into the midday hour.  

SOY

  • The main feature in the early session was that of lower bean and soyoil trade, which turned around by mid-session to trade both sides of even.  
  • Commercial pricing activity finally stabilized the soyoil downturn as recent shorts covered and lower levels perhaps invited a few new longs to hop on-board.  
  • March beans traded through the 200-day moving average of $9.21, but a lack of down-side follow-through created short-covering as soyoil futures recovered.  
  • Oilshare stabilized with March trading higher to 35.4%, as March soyoil futures moved back over 33c.   
  • March crush moved higher to 1.01c/bu.  Traders once again started to buy soyoil/sell meal which pushed March meal back below the $300.00 level, which held steady on good commercial pricing interest.  
  • While there is no sign of Chinese purchases of US beans, Chinese crushers were reportedly offering for Brazilian beans for March/May shipment.  Bean spreads continued on the defensive as the lack of US business feeds into weaker values, with July/Nov trading out to 7 1/2c from 5 3/4c.  March/May meal widened out to $4.70.  

GRAINS

  • Corn prices snapped back today suggesting once again that the large breaks below $3.80 continue to find value.  The back and forth trade around $3.80 keeps price action sideways, suggesting that $3.80 is a level that could represent equilibrium heading into the planting season.  
  • Passage of the trade deal, signing of USMCA, and a firmer South American corn basis suggests that US exports may improve heading into 2020, which is what corn needs if it is to have an extension rally.    
  • Prices will remain extremely sensitive to weather in lieu of last year's wet season.  Corn bears got their way yesterday, but today suggests that playing the range is perhaps a better way to go.  
  • Spreads firmed a bit on the rally, with July/Dec narrowing back to 3 1/4c from 5 1/2c.  March/May traded into 6 1/4c from 7c.  
  • March wheat did not hop to the upside today, as funds are long and not willing to take prices higher heading into a long weekend.  Wheat spreads were slightly wider with March/May trading back out to 1 1/2c.   

AT MIDDAY THE MARKETS ARE AS FOLLOWS:

                                                          HI                                LO

March beans: 1/2 higher                9.26 1/2                         9.20

March meal:  .20 lower                  301.60                          299.60

March soyoil:  17 lower                    3330                            3275

March corn:     10 higher                 3.86 3/4                    3.76 3/4

March wheat:  1 1/4 higher             5.70 1/2                        5.64 1/4

March canola:  4.10 higher             481.10                          474.50

OUTSIDE MARKETS

Stocks are up 50 pts, with crude oil breaking down $58.37/barrel.  China's economic numbers improved somewhat, with the second largest economy growing by 6.1%, down from 2018's 6.6%, gov. data showed today.  Growth in the 3 months ending in Dec. held steady at 6.0%.  It is the hopes that the trade deal continues to stabilize China's market, and add to economic growth globally.

CLOSING COMMENTS

Money continues to flow into equities while Ag markets play a wait-and-see game.  The funds are building another short in corn, but could it be a bear trap?  Think that beans will continue to struggle against corn moving forward, and that soyoil values may still have to prove that they are not done moving lower.  It could be that prices have to head low enough to make room for a spring rally, so rallies may still see more selling / hedging interest when we get there.  Given the outlook for 2020 acreage, which should be higher, and crops on the way from South America, the markets may remain in trading ranges as follows:

March corn:  $3.71-$3.91

March meal:  $295.00-$308.00

March soyoil:  3250c-3450c

March beans:  $9.00-$9.40

March wheat:  $5.40-$5.80

Whether the wheat top is in remains questionable.

There is no trade Sunday night, and markets open Monday evening.   

Have a good weekend..........See you Tuesday.

 

WPI on Twitter

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