World Perspectives
feed-grains soy-oilseeds wheat

PM Post - Rising Open Interest

THE OPEN

March beans:  2 1/2 lower

March meal:  .20 higher

March soyoil:  29 lower

March corn:  3/4 higher

March wheat:  4 1/2 higher

The markets opened as called with grains continuing to trade higher against a weaker soy complex.  The signing of the Phase One deal started on time with stocks rallying into the event, but beans were pretty much unimpressed.  Wheat prices again were the focus with technical buying activity continuing, adding spillover support to corn. Traders were back to selling soyoil / buying meal on the back of weaker energies.  The NOPA report contained a large bearish surprise for soyoil, where stocks were much higher than expected, further breaking down the market as bulls liquidated.  

The China/US agreement goes into effect 30 days from signing.  

SOY

  • The soy complex traded on a mixed note with a liquidating soyoil and oilshare market the key feature of the day.  
  • Technically speaking the March soyoil chart put in a toppy appearance for the first time in months, leading to a weaker trade today.  Several bearish items coincided as well to weigh on the soyoil market, including a bearish NOPA report, weaker energies, and lower canola prices.  The Dec. NOPA report put oil stocks at 1.757 bln lbs, much higher than the expected 1.507 bln bu.  
  • The EIA headline petroleum stats were also bearish, finding larger build in the products than expected, breaking crude down to $57.36/barrel.   
  • NOPA crush was higher than expected at 174.8 mln bu but it did not help beans that the trade is skeptical as to future Chinese purchases, with prices selling off to the pivotal $9.33 level of trade.    
  • Funds were in key liquidation mode in soyoil as the day wore on, with March soyoil hitting new lows trading closer to the 38% Fib level at 33c.  July/Nov bean spreads traded from 1 3/4c to 3 3/4c.  March/May meal widened out to $4.80 from $4.50.  

GRAINS

  • Higher wheat prices continued as more funds purchased on a strong up-trend and follow-through at new market highs.  
  • Corn continued to trend sideways but also respected its key support level at $3.86 1/2 (100 day moving average) where more shorts covered.  
  • The EIA ethanol report leaned bearish, finding a larger -than-expected jump in production, which was 3.3% higher, and would utilize over 5.7 bln bu of corn.  Ethanol stocks were 2.4% higher WOW.  
  • Buy wheat/sell corn continued with the spread trading to 1.89c from 1.80c.  Corn spreads were firmer as prices tried to follow wheat, with July/Dec narrowing into 1 1/2c from 2 3/4c.  Wheat spreads narrowed as well with March/May narrowing into 1/2c from 1 3/4c.  
  • KC wheat was up about 1/2 the amount of Chicago, with the March contract back over the $5.00 level as more shorts covered. 

AT 12:00 THE MARKETS ARE AS FOLLOWS:

                                                                 HI                           LO

March beans:  4 lower                        9.43 1/4                   9.33

March meal: .50 higher                      303.90                     300.80

March soyoil:  73 lower                      3411                        3330

March corn:  1/2  higher                     3.90 1/4                   3.86 1/2

March wheat:  8 higher                      5.78 3/4                    5.68 1/4

March canola:  4.30 lower                  482.20                     476.00             

OUTSIDE MARKETS

The Dow started the day 60 pts lower but set a new record high as Trump addressed the White House and press signing the new agreement, over 29,000 as the proceedings took place, up 150 pts.  

CLOSING COMMENTS

Funds are now long 40K wheat, short 60K corn, and even in beans.  There is a lot going on in Washington with politics, which seems to keep bears away.  Russia has a new grain trader that may try to control what goes out of that country, and lower exports means more potential US biz.   Open interest in wheat and corn has been moving higher, which could suggest perhaps that China is getting protection on in front of possible business moving forward.  For beans, the skepticism continues, as Brazil origin is now cheaper than US.  Not a good day technically for beans, and if long may want to opt out of something here.

The markets have been looking forward to this signing day, hoping to gain some purchase clarification.  Think what we may be seeing now is a buy-the-story, sell-the-fact trade, though that may not pertain to wheat.  

Current trading ranges now established are as follows:

March soyoil;  ctr highs 3567c, but the bottom is not clear right now.  The market has yet to stabilize but would look for a test of 33c.

March corn:  $3.75-$3.95

March wheat:  $5.50 - $5.78/$5.80 potential or higher

March beans:  trading range has been from $9.15-$9.60, and best support on a violation of $9.33 is $9.21.  Should we take out $9.33, look to go there

March meal:  top is in place at $307.00, but bottom trade remains unclear.  However, the top at $307.00 is stronger than lower support at $295.00.

 

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