World Perspectives
feed-grains

PM Post - Macros Prompt Fund Selling

THE OPEN

Nov beans:  5 3/4 lower

Dec meal:  1.40 lower

Dec soyoil:  15 lower

Dec corn: 1/2 lower

Dec wheat:  1 higher

The markets opened as expected but the soy complex found new selling after the open which drove beans lower and grains off the new highs traded.  Stories include ongoing concerns over China's energy crunch and what they are going to do about Evergrande.  Goldman's higher projections for energy prices found crude in the green, as is the US dollar, early in the session.    Macro markets turn at midday, with crude oil seeing a round of profit-taking resulting in a sell-off back towards $74.39/barrel.  Concerns about a gov. shut-down finds the Dow sharply lower at midday, down over 450 pts, lending a macro feel to Ags.

SOY

  • The soy complex traded lower after technicians noted that November beans once again could not get over the $13.00 level which led to more selling.   A quiet pace of exports and harvest pressure added to the negative price action.  
  • Spreads were slightly firmer with Nov/Jan beans trading into 9 3/4c from 10c, while the Nov 21/22 traded from 29c to 25 3/4c.  December meal holds onto its trading range lows, but soyoil futures turns choppy trading lower as crude oil enters a round of profit-taking.  
  • Crude breaks to $74.37/barrel, applying pressure to oilshare with Dec trading down to 45.85%.  Dec crush maintains strength at 1.00c/bu.  At the midday hour, beans have continued to find fund selling and liquidation on the back of all the issues, harvest pressure, and sharply lower soyoil values.  Dec/March meal trades from $4.50 out to $5.00 carry.  

GRAINS

  • Weaker soy led to a wobbly open for corn, but wheat values maintained a steady to higher trade for the first hour.   Matif wheat made new highs which underpinned prices today.  December wheat strengthens from the sell-off to $7.15 as more shorts probably exit for the door on technical strength, and position - squaring in front of the USDA stocks report on Thursday.  
  • While a lack of sales for beans weighed on that market, the 150,000 mt of corn sold to Mexico for 21/22 did not seem to have much sway.  Analysts at China's CNGOIC forecast that they would import 20 mmt of corn this year vs. 29 mmt the prev. year.  Announcements about a good corn harvest in China suggest that the US may not get as much business as last year, though the Dalian prices are only 20% below the May high.  China announced that it would also take more milo and leave DDG imports unchanged.  
  • Corn spreads were in the same territory for Dec/March trading from 7 1/4c out to 7 3/4c, while Dec 21/22 inverse traded from 22 1/2c down to 17 3/4c.  The rumor mill continues to swirl that China has been in the market making inquiries for US corn.  At midday, ags are struggling along with outside markets as funds hit the sell button.  Dec wheat/corn trades from 1.76c to 1.86 3/4c.

AT MIDDAY THE PRICES ARE AS FOLLOWS:

                                                                                       HI                            LO

November beans: 9 lower                                              12.87                       12.76

December meal: .70 lower                                             340.40                     337.80

December soyoil:  50 lower                                           58.32                       57.29

December corn: 4 lower                                               5.41 3/4                   5.32 1/4

December wheat:  9 lower                                          7.26 3/4                    7.11

November canola: .70 higher                                      892.60                     875.70

OUTSIDE MARKETS

The Dow is off 112 pts. as crude oil trades to new ctr highs at $76.67/barrel.  There is a potential gov. shutdown if resolutions on budget and debt limits are not reached.  At midday, the Dow is over 480 pts lower.  Comments from Fed Chair Powell included statements that said the US central bank has met criteria to begin to taper, something that the stock market did not like to hear.

CLOSING COMMENTS

Would look for prices to continue to define trading ranges as traders square up for the stock report on Thursday at 11:00 central time.  General expectations are for grain stocks to remain tight, but beans to show a looser tendency.  

US weather maps are expanding rains in the nearby area as moisture works up through Mexico north, crossing the Delta and central Midwest this week.  Up to now the harvest weather has been wide open.  

The Gulf situation continues to improve with reports that two major commercials are now up and running again with full capacity.

Seasonally beans tend to begin to carve out a low, with corn prices tending to trend higher post Aug and Sep WASDE reports.  Seems that is no exception this year.  Beans are seeing weight first from better-than-expected yields coming in from the fields, (chatter that is), lack of exports as China turned to Brazil in lieu of Gulf slow-downs, and now Chinese crush plants shutting down operations temporarily.  Beans are needing to factor in all these negatives, as shutting down crush plants in China is negative for demand, where issues have already been noted courtesy of Ida.  

Mini-trends could begin to develop, ie buy corn/sell beans and buy corn/sell wheat into the report.  End-users could be raising ideas for corn pricings given the recent rally.  Prices are still in trading ranges except for corn which expanded to the upside.  Choppy trade still leaves those open to only having to do what they must do for now.  

 

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