THE OPEN
November beans: 9 3/4 higher
December meal: 2.40 higher
December soyoil: 13 higher
December corn: 2 1/2 higher
September wheat: 4 1/4 higher
Prices worked higher as the setback this week has been hefty. Shorts were covering with some also picking bottoms. Grains got a continued lift with wheat in the lead, having lost the most up to now. Prices turned higher into the open on fairly good volume, which signaled an extension rally after the session started.
Since there has been no fundamental news to merit a rally, today's move up was mostly technical in nature against the backdrop of the steep losses this week. There was light chatter in the marketplace speculating that the next USDA report would be bullish for beans, and more rumors about Chinese purchases presenting an air of caution with prices at trading range lows.
SOY
Bean prices put in an extension rally after it was noted that values were not staying down under the $9.00 November bean level of trade. Short-covering ensued, sending November beans higher to fill a small open gap at $9.18 1/2, which then triggered buy-stops resulting in a move towards the pivot point level at $9.25. Rumors about China in for South American beans helped to support values as well, with noted basis levels firming for Brazil and Argentina.
The excessive heat this week most likely challenged bean crops, and shallow roots may not be able to withstand the heat where rains did not cross. Ideas are that bean conditions will be 1-2% lower on Monday. Products tagged along as prices rose, but meal put in the better performance once again vs. soyoil, with oilshare trading to 30.85%. Sep crush values were lower, however, trading down to 92c/bu.
Meal prices soared as well as the Dec contract climbed back towards $320.00, with good consumer pricing activity at chart lows this week. Meal spreads were wider with Sep/Dec trading back out to $5.00 from $4.40. Sep/Nov beans traded out to 12 1/4c from 11 3/4c. During the session, Brazil's Safras Mercado estimated the 2019/20 Brazil bean harvest at 123.788 mmt, which would be 4.7% higher than last year. Canola prices tagged along with the soy complex, also trading higher on the day.
GRAINS
Corn and wheat futures entered into a short-covering bounce after sharply lower prices earlier this week. On the negative side for corn are lower ethanol margins and continued competition from South America, where Argentine corn is quoted at 60c under US origin.
During the session, Brazil's Safras Mercado estimated 2019/20 Brazil corn harvest at 103.97 mmt, vs.the previous crop year at 107.50 mmt. Brazil's harvest is on the downside now, with more signs of imports into the Southeast for livestock producers.
For the day, the lower price action was met with short-covering and bottom picking from those still betting that acreage and yield could be lower when the August 12 report arrives. There was noted good buying for corn on decent volume into the overnight close, which translated over into the day session, as well as sources saying that more commercial pricing was noted as prices worked into the lower end of recent ranges.
September wheat climbed back over $5.00, eventually garnering a much larger reaction as prices jumped into key resistance at $5.16, stabilizing chart patterns. Recent buy corn/sell wheat trade corrected; Sep wheat/corn traded from 69c up to 82c. The Dec/Dec corn inverse firmed to 20 1/4c from 13c on the rally. In the meantime, the Kansas City/Chicago spread is wider today, as the warmer weather allows for the last of the HRW harvest to conclude. Sep wheat charts could still be posting a top, but lifting shorts at trading range lows is still the way to go until a top is confirmed with a break under necklines in a possible head and top formation.
AT 12:00 THE MARKETS ARE AS FOLLOWS:
HI LO
Nov beans: 22 higher 9.24 8.97 1/4
Dec meal: 5.00 higher 319.90 312.30
Dec soyoil: 50 higher 2863 2801
Dec corn: 5 higher 4.39 4.28 1/2
Sep wheat: 12 higher 5.16 3/4 4.92 1/2
Nov canola: 2.50 higher 450.00 444.0
OUTSIDE MARKETS
Equities opened higher, which seemed to spill-over into the rest of the Ag complex today. Prices backed off but the Dow remains higher at midday. Crude oil was weaker again, trading off to $54.99/barrel, new market lows. The US dollar traded off to 96.75.
CLOSING COMMENTS
The bears were in control this week, but it is Friday and with more unknowns ahead of us they were also covering positions which led to a nice opening bounce. The advertised numbers for Monday's ratings are an anticipated 1-2% decline for both beans and corn given hot temperatures this week. The heat is expected to break next week with alternating rounds of rainfall coming in setting up for a normal weather pattern in the month of August. Corn will continue to pollinate as we move into August weather.
With better weather ahead for next week, today's rally may not be trustworthy, but it did manage to stabilize charts that were posting major tops by sending prices into the middle of recent ranges, wheat included.
Heading out the door, funds remain around 150K long corn, 35-40K wheat, and short 50K beans, 20-30K meal, and 40-45K soyoil. Tonight, we will get the latest commitment-of-trader's report which will define how many corn bulls liquidated positions this week.
In the meantime, wheat continues to be an interesting trade given the continuing competition from the Black Sea. In the FYI department, Russia announced a 15-year investment plan to increase grain production to 150 mmt vs. the current 118 mmt. If that occurs, exports could expand to 56 mmt vs. 45 mmt this year. See related analysis in Ag Perspectives today.
The August 12 report will include a re-survey of acreage, satellite, and FSA data. Persistent theme as indicated by today's trade; stay in trading ranges until the numbers are released.
Cattle-on-feed is out at 2:00 PM, with general advertised expectations around 2% more "on feed" inventory, and placements/marketings slightly lower. June cattle placements seen down 1.8% from year ago -analysts - Reuters News
On a lighter note, when inquiring why beans were up 20c, it was said that President Xi was seen on the exchange floor with a trading jacket, but that turned out to be a heat induced mirage.
Have a good weekend.
TAGS – Feed Grains, Soy & Oilseeds, Wheat, North America