The major trends continue to be that of buying grains/selling soy. Beans continue to see a lack of buying enthusiasm vs. grains as bean carry-out in the USDA report may be larger. Analysts are forecasting that bean production and yields could be larger and exports smaller.
Demand for both beans and corn has fallen off, but beans are encountering some headwinds from cheaper prices from Brazil. The fact that Brazil beans are more competitive to China is unusual for this time of year. Agricensus data showed that South American premiums are sharply lower amid heavy selling pressure. Usually August to December finds US bean premiums cheaper than Brazil. Lower freight rates are said to be somewhat responsible, while the weaker Brazilian currency has also been more attractive to the farmer resulting in increased farmer selling. Both bean and corn crops are also getting off to a good start in SA which could increase the prospects for an early harvest.
As opposed to beans, many articles written are featuring the tight supply of wheat globally. One headline was also that Russia was going to put an export ban on fertilizer and select nitrogen products for the next six months. Higher fertilizer and fuel prices remain a large concern about crop potential next year. The need for wheat acreage to increase and headlines about higher prices continues to feed the wheat bull. Minneapolis wheat hit its highest price since 2008, and is about twice as much as the last two years.
As to corn, good ethanol margins are supportive for corn, where the carry-out may remain status quo. Technically grain charts have improved notching trading ranges higher. The buy grains/sell bean trade continues to have merit. The December roll will begin Friday which could bring some weakness to spreads and flat price.
WEATHER – forecasts are favorable for harvest progress next week before rains move through again. The US plains could use more precipitation. Field work should improve this week and next.
Argentina is picking up good rains in the north with more coverage in the 8-14 day forecast. Brazil sees better rains with more on the way in the next few weeks, particularly for the north. Australia is forecast to receive heavy rains which could delay wheat harvest.
REPORTS
Export sales:
beans: 21/22 1.86 tmt (vs. an expected 1.0-2.2 tmt)
meal: 21/22 net 226,600 tmt and 22/23 net minus 200 tmt (vs. an expected 100-280 tmt)
soyoil: 21/22 net 11.200 tmt (vs. an expected 0-30 tmt)
corn: 21/22 net 1.22 tmt (vs. an expected 700-1.4 tmt)
wheat: 21/22 net 400,100 tmt (vs. an expected 180-520 tmt)
Sales were expected to improve and did meet those expectations.
Wheat: Sales up 49% from prev, wk with increases primarily for Mexico. There are rumors for Chinese biz.
Corn: Sales up 37% from prev. wk with increases to Mexico. Sales were better than expected but buyers were mostly traditional without China. Argentine offers may begin soon.
Beans: Sales up 58% from prev. wk with increases for China of 1,207,300 tmt including 510K switched from unknown.
Meal: Sales primarily for Mexico and Guatemala.
Soyoil: Sales primarily for Mexico and Costa Rica.
ANNOUNCEMENTS
World food prices hit new 10 year highs in October, rising for a third straight month on increased cereals and vegetable oils, with the index at 133.2 vs. 129.2 in Sep.
China’s wheat stocks can meet 1.5 yrs of demand, Ag officials announced.
Calls are as follows:
beans: 2-4 lower
meal: .90-1.50 lower
soyoil: steady/firm
corn: 1-3 higher
wheat: 4-6 higher
Outside markets feature lower stocks down 13 pts with crude at $82.60/barrel, and the US dollar firmer at 94.28.
Tech talk:
Soy: January bean trade remains sideways but the next direction could be lower as we trade back into minor trendline support once more which is towards the recent low of $12.36. Breaking this level will likely lead to a test of prices back towards the $12.15/$12.20 level. Major direction is diways, but trading into support levels is never a sign of strength. December meal chart also hits a high at $340.00 to establish a new and higher $320.00-$340.00 range. Overall the chart is still in recovery mode, and could target $345.00 where multiple tops may curb a further advance. December soyoil futures chart now appears a bit toppy for the first time having traded down to touch the 100 day moving average at 60c. Still the price action has been able to recover from steep pullbacks before, and would need a close under 60c to trigger more fund selling and a drop to 55c. For the morning prices have recovered nicely from 60c to close near 61c.
Grains: December wheat is congesting having traded above $8.00 to a new high of $8.07. The pullback to $7.77 is normal for an upward trending market as all higher levels do have sharp breaks in order to define the lower end of the range. The new highs have yet to be met with a good technical reversal signal, and would expect a retest of the current new levels at some point. Suspect we could be gearing up for a $7.75-$8.25 trading range. The December corn trend is now strengthening with an ADX at 27 as opposed to levels in the teens. Expect pullbacks to see support, and the lowest end of the range has moved up to $5.45. Suspect that we could retrace back up towards $5.85 again as long as prices can remain over $5.55, and there is not yet a good reversal signal to stop a further advance. Target high is still $5.90/$5.95.
JAN/MARCH BEAN SPREAD: Major direction is lower from an inverse of 42c back in May to a carry- out to 10-11c. Major direction is lower, and the market is verging on oversold at 36% RSI. The market is at its lows now from 11-11 1/4c, matching a cycle low in October. Values past 11c will target possible lows of 12-13c.
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