World Perspectives
feed-grains soy-oilseeds wheat

PM Post - On the Defensive

THE OPEN

November beans: 1 lower

December meal:  .20 lower

December soyoil:  23 lower

December corn:  1/2 lower

September wheat:  3 lower

The markets opened defensively and continued to head lower despite the announcement of beans sold to China.  Funds are liquidating bean length into the report on Wed. as weather conditions remain ideal.  Wheat markets continue to trade lower having broken below the important $5.00 benchmark.  Beans were lower as growing conditions are ideal, and tensions continue between the US / China.  This morning it was reported that President Trump will move to sanction Hong Kong's Executive Lam and other Chinese officials.  

SOY

  • The soy complex traded lower with meal prices setting new ctr lows.  Funds are estimated to be short around 24K meal, as prices took out previous ctr lows in December at $287.50.  
  • December soyoil found long liquidation as well as energy prices and palm oil worked under pressure.  Oilshare found a bit of profit-taking as well, with Sep. at 35.24%.  It was foreshadowing that beans could not rally over $8.80 as funds took the business announcement as an opportunity to liquidate length.  
  • Trade tensions and a good crop triggered lower price action down to major support at $8.68 where both trendline support and the 100-day moving average cross.  
  • December soyoil poked through the recent lows of 3080c which also triggered more sell-stops and further long liquidation.  Spreads were slightly firmer for nearby beans with Sep/Nov trading from 2 1/4c carry to 3 3/4c.  Sep/Dec meal spreads were firmer as well trading into $4.40 from $5.20.  

GRAINS

  • Wheat prices found more fund selling as prices cracked the $5.00 benchmark in the last moments of the night session trade.   All three classes of wheat closed on their lows and found new ones as sell-stops were triggered under the market.  
  • The large break was in part due to technical considerations, as Sep. and Dec. wheat had large outside days closing lower yesterday.  That type of activity typically does see follow-through selling.  Sep. wheat futures are now close to the overall lows of $4.71, with some short-covering noted as prices neared the $4.90 level.   The sell signal for wheat continues to pan out as harvest continues in Russia, and big crops are forecast in Canada.  World supplies could increase in the upcoming August 12 USDA report.   
  • December corn futures also worked lower with prices pushing back towards ctr lows at $3.20.  End-users continue to sit under the market, and do not seem concerned about paying up as large crops are on the way.  
  • Fund selling was more absent in corn today, as bean liquidation took the spotlight.  However, September corn did manage to make a new ctr low at $3.07 1/4 in the midday hour, as the $3.00 target looms ahead.  

AT MIDDAY THE MARKETS ARE AS FOLLOWS:

                                              HI                       LO

Nov beans: 8 lower            8.79 1/2              8.68 1/2

Dec meal: 1.60 lower         289.00                286.60    **new ctr low

Dec soyoil:  45 lower         3144                   3078

Dec corn:  3 lower             3.24 1/4              3.20

Sep wheat: 9 lower            5.03 3/4             4.90 1/2

Nov canola: .50 lower       491.40                488.90

OUTSIDE MARKETS

Stocks opened lower but remained defensive as tensions between US /China escalate.  At midday, stocks are down 82 pts.  The US dollar continues to firm trading up to 93.62 as traders book profits on recent buy gold/sell the US dollar trade. 

CLOSING COMMENTS

The mission of the markets are to continue to incorporate new production and yield ideas.  Further position - evening was noted ahead of the weekend and into the next USDA report August 12.  Corn prices were declining but the markets have already factored in a good break as private estimates work are over 180.0 bpa now.   The USDA may have to make adjustments for corn exports, which have been generally lower as China has purchased some, but Ukraine origin and SA is cheaper.  

Chinese crush margins are good, and they continue to be under the bean market on breaks of size.  Given today's price action, more interest should arise.  Along with US beans, China has now been buying Brazil cargoes as well, and could be looking at them for Q1 needs.  

Conditions on Monday are expected to be mostly unchanged, with traders continuing to focus on Iowa's growing conditions.  Areas of the Midwest that have seen rainfall will have to offset losses in that state.   

The markets are on a big break, but have certainly hit some major targets.   There is probably only one certainty now which is that big crops will be on the way.  Lower prices today make room for that.

Low end targets given price action today:

Dec corn:  $3.15

Nov beans:  close under $8.70 targets $8.55/$8.60

Dec meal:  $285.00

Sep wheat:  $4.75/$4.80

Dec soyoil:  3050c, and would cover a short or try the long side if we go there.

 

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Infrastructure investment due diligence

On behalf of a Canadian oilseed processer WPI's team provided market analysis, econometric modeling and financial due diligence in support of a $24 million-dollar investment in a Ukrainian crush plant. Consistent with WPI's findings, local production to supply the plant and the facility's output have expanded exponentially since the investment. WPI has conducted parallel work on behalf of U.S., South American and European clients, both private and public, in the agri-food space.

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