THE OPEN
March beans: 22 higher
March meal: 5.00 higher
March soyoil: 87 higher
March corn: 13 higher
March wheat: 4 higher
Prices opened strongly with more fund buying based on technical recovery and upside follow-through. The big break in the market, whether due to margin calls or chatter that a Chinese fund liquidated length, served to knock out weak longs and bring overbought extremes down to a more balanced level from which to own the markets anew. The correction did not hurt the strong ADX values, which continues to point to strong market upside trends ahead. Soyoil prices were sharply higher following strength in the canola market, which advanced to new contract highs early in the session.
SOY
- The soy complex traded higher building on a strong performance yesterday which rejected lows and implied that prices would head back into recent trading ranges. The strongest market continues to be soyoil, where positive chart formations and a fund long sent prices back towards recent contract highs.
- March canola prices escalated to sharply higher prices, and new contract highs at $705.70. March crush trades to 73.71c/bu while oilshare trades down to 33.33%. March bean prices dutifully moved towards the next line of major resistance from $13.75 / $13.80 before finding more profit-taking and selling interest.
- March meal traded to key resistance at $440.00 as it defines what could be a $420.00 - $450.00 or higher temporary trading range. All in all, meal was a more constrained trade as soyoil prices took center stage to trade back above 44c for the March contract.
- Spreads remained firm with July/Nov beans trading up to 2.07 3/4c from morning lows of 1.95 3/4c. March/May meal inverse traded from $3.70 down to $2.70. At midday, prices remain higher, but feels like some of the opening strength could be waning for a mid-range close.
GRAINS
- Grains traded higher with wheat and corn neck-and-neck into the midday hour with 14-15c gains.
- March corn trades to the upside of what resembles an elongated bull flag, with stochastics turning up as prices trade higher. The business announcements to China this morning helped to accelerate opening gains, with prices pushing fairly close to previous contract highs of $5.41 1/2 in the March contract. Bull-spread activity for corn was noted as July/Dec traded into new contract highs at 84 1/4c from 74c, and May/July into new contract highs with a 6c inverse. The business announcements added more pricing activity to the market as well as short-covering and new fund buying activity.
- Wheat gained as well, as prices found technical chart-based buying activity as $6.50 returns in March as a major support zone. March/May wheat traded to a 2c inverse for the first time from a 3/4c carry. At midday, prices have not given back much, destined to go out on a solid note higher.
- In terms of bullish news items, Brazil's delayed safrinha crop is reported by IMEA at just 1% planted vs. 9.8% this time last year, and vs. the 5-year average of 9.6%.
AT 12:00 THE MARKETS ARE AS FOLLOWS:
HI LO
March beans: 26 higher 13.76 1/2 13.33 1/2
March meal: 7.50 higher 439.70 425.60
March soyoil: 80 higher 4423 4265
March corn: 18 higher 5.31 1/4 5.08
March wheat: 15 higher 6.67 3/4 6.41 1/4
March canola: 8.00 higher 705.70 680.00 **new ctr high
OUTSIDE MARKETS
The Dow opened 100 pts higher but has currently trended lower into midday. The reflation trade continues, as what appeared to be imminent stimulus now appears to possibly be delayed until March. The Fed will offer up more comments on interest rates this week, but no doubt that rates are going to stay low until Covid is under control. In the meantime, crude oil has dipped to $52.29/barrel, while the US dollar falls to 90.11.
CLOSING MARKETS
The market put in a good rebound with prices turning higher from lower, and confirming that trading range bottoms may have been placed. For now, technical bottoms seem more certain than technical tops, with corn prices not far away from contract highs. Meal prices remain the underdog, while soyoil also continues to show signs of life.
Whether traders can believe in this market recovery will be the key to higher trade, but the bounce affirms that to sell at market lows is now a dangerous thing to do. If wanting to be short, have to wait for those triple tops such as noted in March beans at contract highs followed by failure, or a complete break-down under now defined lows that will point to another leg down. For now, until we get closer to complete harvest in Brazil and through the Feb. 9 report, would continue to price, own breaks, or cover shorts quickly. New contract highs could still be coming, though the wash-out last week suggested it may be more difficult to do so.
FYI DEPARTMENT
Cordonnier raised the Brazilian bean crop estimate by 1 mmt top 129 mmt and raised total corn by 3 mmt to 105 mmt, (USDA at 133 mmt and 109 mmt), with a neutral to higher bias given recent rains.
TAGS – Feed Grains, Soy & Oilseeds, Wheat, North America