The USDA report sent prices sharply higher yesterday and the market will need a few days to digest the numbers. Charts did a sharp u-turn from Tuesday morning lows with recent shorts covering on the back of bullish numbers. New money was noted coming into December corn and November beans, setting off outside days closing higher which typically finds follow-through, as it is this morning. The worries over drought in the western states are magnified given the lower total acreage numbers. Western states account for around 23% of bean acreage and almost 20% of corn. Bottom line is that the US needs good weather for July and August with near or above beginning trendline yields. WHile we may get them in the Midwest, what will the western cornbelt and northern plains have to offer?
From the demand side, there is talk that China has been around the corn and bean markets, though the rally did not help to push this scenario. On the production side, freeze concerns are now abundant for the already devastated Safrinha crop in Brazil with talk about quality concerns due to the freeze. This will make the Sep/Dec corn spread interesting as we approach the fall.
World veg oil markets remain strong, and soyoil values attempt to push through 65c for the Dec. contract. It has help this AM from a higher palm, canola, and energies market. Meal prices finally pop as some book profits on the run-up in oilshare. Beans are higher on unchanged acreage and soyoil strength.
Corn: Corn trades with expanded limits today. IN the report yesterday, the largest corn increases for corn acres came from Illinois, followed by the Dakotas and Minn. The corn stocks number was in line, neither finding nor losing bushels.
Beans: States that had the largest bean increases were for Mo., Iowa, and North Dakota. Reductions were noted in Ind, Kansas, Neb., and Ohio. Bean stocks were more neutral in scope but remains bullish.
Wheat: Wheat remains a follower of stronger bean and corn markets. The stocks number for wheat was friendlier than the acreage number. Compared to yr ago, only Illinois and Oklahoma saw increased stocks in all positions. There were roughly 14 states that all saw decreases, including Mo. and Ohio.
Weather becomes a key direction over the next several weeks. The July Supply and Demand report is on July 12, and given the lower acreage numbers an increase in demand will add pressure to the upside. Good weather will keep prices from rallying further, but the downside has been put in place.
WEATHER – Weather after July 7 offers a potential chance for rains in the drier areas of the US northern plains. 6/10 day outlook keeps more rains for the eastern cornbelt, and mostly dry in the west. Despite rains, temperatures are forecast to return to a hot pattern week after next in the Dakotas. The forecast remains good for the Midwest and Delta, problematic elsewhere with a few rains sprinkled in to keep things interesting.
REPORTS
Export sales:
beans: 20/21 net 92.800 tmt and 21/22 net 1.67 tmt (vs. an expected 900-2.3 tmt)
meal: 20/212 net 232,800 tmt and 21/22 net 184,500 tmt (vs. an expected 250-700 tmt)
soyoil: 20/21 net 2,300 tmt (vs. an expected 0-15 tmt)
corn: 20/21 net 15,000 tmt and 21/22 net 67,600 tmt (vs. an expected 50-1.0 tmt)
wheat: 21/22 net 226,300 tmt (vs. an expected 200-500 tmt)
Export sales were good for beans and meal, but the market weakness brought to the board by low sales was taken now as a buying or short-covering opportunity.
Wheat: low end sales with cheaper global offers from South America and Black Sea. Feed demand remains active, tenders may be more active moving forward.
Corn: low end sale with poor new crop sales. Demand could increase in coming weeks as Brazil’s poor producing Safrinha crop competes with the US, but likely not this year.
Beans: big sales as expected following the announcements over the last week to China and unknown. Old crop biz is evident, with China taking 1.147 mln new crop.
Meal: big sales as rising South American premiums finds the US more competitive. Feeders are looking for all sources.
Soyoil: sales poor with better global prices elsewhere.
DELIVERIES
beans: 13 RJ O’brien put out 1 and stopped 11
soyoil: 264
Chicago wheat: 20
ANNOUNCEMENTS
India allowed imports of refined palm oil for six months, as announced by the gov.,
Ukraine’s grain 2021 harvest could rise to 75.9 mln tonnes from 65 mln tonnes in 2020, the state weather forecaster stated, due to improved weather. The harvest would include 37.1 mln tonnes of corn, 28.5 mln tonnes of wheat, and 8.3 mln tonnes of barley.
Ukraine’s parliament restored a 20% rate of value -added tax (VAT) on some ag commodities, saying that is cut to 14% yr ago was an error resulting in an increased tax burden for processing industries.
Calls are as follows:
beans: 20-24 higher
meal: 6.80-7.50 higher
soyoil: 140-150 pts higher
corn: 19-21 higher
wheat: 6-8 higher
Outside markets has crude oil trading to new highs today at $75.87/barrel, with the US dollar weaker at 92.26. Stocks are up 80 pts.
Tech talk: December wheat prices move the lower end of the trading range up to $6.55/$6.60 from $6.40, as prices test upper resistance levels. So far double highs at $6.86 were taken out for a test of values closer to $6.95, while a pullback towards the 100 day moving average at $6.70 will provide strong support. All in all, the chart is now sideways from a sideways/lower trend, and pullbacks towards $6.60 now becomes a buying opportunity. Look to maintain a wide sideways chop and where multiple highs at $7.15 could be achieved should we trade over $7.00. December corn trading range low moves up to $5.50 from $5.20, given the rally. The night session open in Dec. corn featured a small gap from $5.88 to $5.91 and remained open providing higher support. Over $6.00, the next resistance does not come into play until prices reach $6.15, which then targets the ctr high of $6.38. November beans runs from lows last week at $12.60 to highs over $14.00. Look for prices to find pullbacks well supported with the strong possibility of testing $14.35/$14.50. Chart price action will now find that good breaks are buying opportunities. December meal bases from $347.00 to $350.00, and moves towards key resistance from $386.00 to $390.00. Look for this market to lag the pace of the others, but pullbacks towards $375.00 to $380.00 are now pricing opportunities. The 100 day moving average in Dec. meal is $388.00, so moving past $390.00 clears tops until we see $395.00 to $398.00. Look for meal to struggle at the $388.00-$390.00 level, however. December soyoil trading range is from 60c-65c. So far the morning chart presents double highs at 65c. If prices can move higher than this level, there is nothing to stop a rally to ctr highs at 6721c. Though prices may stumble at 65c, the chart direction is strong and pullbacks towards 62c should find support.
SEPTEMBER CORN: Reversal day yesterday with trade through $5.50 to $5.99 1/4, locking limit with a small-gap higher from $5.99 1/4 to $6.03 3/4. Interim resistance was $6.12, but the market took it out easily. Ctr high, as a reminder, is $6.56. The move higher moves lower support all the way up to $5.90 as prices continue to trade up. Look for the strong possibility that prices could make a run for $6.50. Traders should flip from selling rallies to buying dips given bullish fundamentals combined with a new chart outlook. Look for an eventual pullback towards the gap, but it is now a buying opportunity. Trading range potential is from $5.75 to $6.35/$6.38.
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