THE OPEN

November beans:  7 lower

December meal: 1.40 lower

December soyoil:  15 higher

December corn:  3/4 lower

December wheat:  6 higher

The markets opened with new highs in wheat helping corn to stabilize, with soyoil futures firmer than expected.  Oilshare returns as a leader.  Stories of conflicts with the Phase one deal weigh on beans and corn.  US trade reps (USTR) will give a speech regarding the Phase One trade deal, which could include adding more tariffs to China for not complying with the terms.   

There is an OPEC meeting today as well which seems to be adding to crude oil volatility.  Macros weigh heavily at midday, as the Dow drops 300 pts. which seems to take ags off the highs.

At 10:00 export inspections are as follows:

beans:  844,488 mt vs. 485,469 mt week ago (vs. an expected 650,000 mt)

wheat:  611,621 mt vs. 383,584 mt week ago  (vs. an expected 375,000 mt)

corn:  808,814 mt vs. 636,037 mt week ago (vs. an expected 530,000 mt)

Inspections were good all around, over expected amounts.

SOY

• The major feature in the soy complex was that of higher oilshare.  December soyoil futures turns to the upside at the open as crude oil sprints to new highs at $78.38/barrel.  Oilshare jumps to 47.21% for Dec while crush trades down to 1.02c/bu from earlier highs of 1.19c/bu.   December soyoil futures jumped into the plus column in upside technical follow-through past 59c enroute towards the 60c target high.  December meal trades to new lows at $323.90 where end-users are waiting to get something on the books.  
• Bean inspections were released today with 340 out of the PNW.  Continued features include buy corn/sell beans and buy soyoil/sell meal into the midday hour.  Nov/Jan bean spread trades out to 10 3/4c from 9 1/2c, while Nov 21/22 inverse loses more steam trading down towards even at 3/4c from opening values of 7 3/4c.   Dec/March meal trades into $4.50 carry from $5.10.  Beans continue to be impacted by reports of decent yields from the fields, and ongoing tensions as regards discussions between US/China trade agreements.  
• The prospect for potential new tariffs if China cannot comply with terms is not sitting well with the bean bull crowd, where a fund 50K long still sits.  Charts continue weak in scope, as recovery trade on the back of higher grains is met by fund selling.  Open interest tomorrow for beans may show this selling today as long liquidation.  Higher crude and canola prices helps to continue to support soyoil through the session.  

GRAINS

• Grains led the way higher as better technicals for corn and an announcement to Mexico for a good amount triggered more fund buying activity, pushing prices to new market trading range highs.  December 21 trades up to $5.45 early while December 22 trades to new ctr highs at $5.38 3/4 as the chart remains very friendly, driven by rising input costs.    Buy corn/sell bean trade continues as a feature.  
• December /March corn trades from 8 1/4c to 8 3/4c, while Dec 21/22 trades from 5 3/4c inverse lows back towards 9 1/2c highs.   December wheat tacks on gains trading up to the next key level resistance at $7.63 1/2 in technical upside follow-through.  
• Funds purchase wheat at the open based on constructive chart signals, and the need for wheat to keep a premium factored in.  Stories for wheat continue to be supportive, as it is reported that the Russian media states that the government is looking to implement a separate wheat export quota starting on Feb. 15, which would be within a broad existing system.  These stories have typically led to wheat rallies, with today being no exception.

AT MIDDAY PRICES ARE AS FOLLOWS:

                                                                       HI                        LO

November beans:  3 lower                      12.47 3/4               12.35

December meal:  1.00 lower                    327.20                   323.90

December soyoil:  59 higher                   59.70                     57.84

December corn:  3 higher                        5.47 1/2                 5.36

December wheat:  1 higher                     7.63 1/2                  7.48 1/2

November canola:  11.50 higher             917.70                    899.80

OUTSIDE MARKETS

Stocks traded 45 pts higher in the beginning session with crude oil trading up to new highs of $77.26/barrel.  Buy energies/sell the US dollar trade is on again.  At midday, stocks are down over 300 pts.

CLOSING COMMENTS

As noted, spread trade activity is the most pronounced feature, with buy corn/sell bean trade a major feature, and buy soyoil/sell meal.   Buy wheat/sell beans are also popular.  This may continue as stories back both.  

beans:  lack of export activity and friction with China weighs on prices.  Fundamentally the Sep. 30 bearish stocks report is the feather in the cap for the bean bear.  China could be waiting for lower prices before making a move, but their energy crunch and shut-down crush facilities can make them patient.  New lows beget new lows, target low is now from $12.15-$12.18.  

corn:  not tight but rising input costs for next year fuels fund buying for Dec. 22.  This is the time of the year when the bean/corn ratio begins to send its signals, and for now the mission of the market is to facilitate corn acres vs. beans.  Could continue to buy breaks, though $5.48 is tough resistance.  Could straddle/strangle $5.25-$5.50 with upside potential, and a possible target high at $5.60.  

wheat:  buy wheat/sell bean trade fully backed, as current Sep 30 numbers were bullish.  Russia's making more noise about export restrictions is also price positive.  Funds are probably even wheat, and may not want to chase a rally, but could be there on a good break.  US wheat is too expensive vs. global origins, but the funds will play the technicals.   Look to possibly target $7.80.

 

TAGS – Feed Grains, North America