Prices started the PM session in the plus column after breaking down from a higher start yesterday. Each different weather prediction seems to exist to show us trading range highs and lows. No doubt that choppy price action equals trading ranges and a halt to uptrends except for soyoil. As to soyoil, Agricensus reported that Argentina soyoil basis is at a record low vs. CBOT soyoil futures which is trading over 70c for only the fourth time in history. Agricensus reported that Argentina’s physical soyoil market was said to be suffering from lack of demand from China and India as flat prices work higher. In the meantime, US soyoil stocks are tighter due to slower crush and the biofuels push. The fan -favorite trade to buy soyoil/sell meal continues, and the cyber-attack on JBS certainly did not help meal demand. Meal basis continues weak, and price action continues sloppy, giving end-users a chance to place some better forward coverage. Beans follow soyoil futures higher, and continue to gain on corn.
The June 10 WASDE will be released at 11:00 central time, and traders are not expecting many changes. After the release of the numbers it will be back to weather and crop development. Given the structure of the market, the reactions are geared up either way leaving pockets of air as traders get in and out at the same time, leaving end-users to take advantage of breaks while farmers are waiting for higher prices. THe largest reaction will come from the June 30 Stocks/Acreage report, and given the steep drop last week those larger acres could be already factored in.
July open interest continues to come out of the market breaking bean and corn inverses down, as the official roll begins on June 7. The western corn basis has weakened over this past week.
STORIES
Russia set its grain export taxes for June 9-15, as reported by the Ag Ministry. The wheat export tax for the period will be set at $29.40/tonne, with barley and maize at $39.60 and $50.00, respectively.
WEATHER – US forecast remains hot and dry over the next 10-14 days which will build concerns for areas in the western Midwest, the PNW, the Northern Plains, and the northern Midwest. Forecasts call for a slightly wetter pattern in the Dakotas, which is badly needed. Confidence in all the models remains low, though temperatures in the northern half of the US are said to reach 90-100 degrees in some areas. If current hot and dry patterns verify, will bring an interesting Sunday night trade.
Globally Black Sea weather is more benign though more dry pockets are reported. Brazil’s low water – no water problems continues.
REPORTS
Export sales:
beans: 20/21 net 17,800 tmt and 21/22 net 180,300 tmt (vs. an expected 20/21 minus 100-200,000 tmt and 21/22 net 0-400,000 tmt)
meal: 20/21 net 217,700 tmt and 21/22 net 500 tmt (vs. an expected 20/21 net 100-300,000 tmt and 21/22 net 75,000 tmt)
soyoil: 20/21 net 1,000 tmt (vs. an expected 20/21 minus 10,000 to 25,000)
corn: 20/21 net 531,100 tmt and 21/22 net 439,500 tmt (vs. an expected 20/21 minus 200,000 to 400,000 tmt and 21/22 net 300-900,000 tmt)
wheat: 20/21 net minus 33,300 tmt and 21/22 net 398,300 tmt (vs. an expected 20/21 minus 25,000 to 100,000 tmt and 21/22 net 200-500,000 tmt)
Corn was at the higher end of expectations, wheat neutral, beans, meal, and soyoil low end. Not much reaction to the sales by the market, acknowledging that weather trumps all right now.
Wheat – 20/21 down from prev. wk and 4-wk ave. Increases for Brazil as they work wheat into feed on tight corn supplies. Strong wheat feeding moving forward.
Corn – 20/21 down 5% from prev. wk but up noticeably from 4-wk ave. Increases for Japan and China (158,500 mt, including 63,800 mt switched from unknown). 21/22 primarily to CHina for 1,112,500)
Beans – 20/21 down 68% from prev. wk and 82% from 4-wk ave. 21/22 exports a marketing year low. Cheaper offers continue out of South America.
Meal – 20/21 up 10% from prev. wk and 31% from 4-wk ave. Cheaper offers continue out of South America, feeders looking for any source.
Soyoil – 20/21 down 41% from prev. wk. High prices keep demand out of the US with cheaper offers elsewhere. It’s all about biofuels.
ANNOUNCEMENTS
BAGE reported that 21/22 wheat crop is 17.1% planted vs. 10.1% wk ago, and vs. yr ago at 30%.
Russia’s Ag Ministry kept its wheat production unchanged at 81 mmt.
Argentina’s late planted corn is showing better-than-expected yields, with 34% of the crop already harvested, according to the BA Exchange.
Calls are as follows:
beans: 15-18 higher
meal: 1.80-2.20 higher
soyoil: 80-90 pts higher
corn: 8 1/2-9 higher
wheat: 5-7 higher
Outside markets feature higher crude trading up to $69.26/barrel, with the US dollar down to 90.46. Stocks are up 60 pts.
Tech talk: July beans trades in a wide range and a hold of the $15.45/$15.50 level will keep prices slanted upwards towards $16.00. On a stronger note, would now look to re-test $15.85. The November bean chart makes a case for now holding support at the $14.00 level, and the chart is showing more support now from $13.90-$14.00 with a successful test. Would own against this level for a possible test of $14.40. July meal pushes down towards $390.00 but appears to be feeling a bit “oversold”. The process to move down is slower, and prices are going to open at the higher end of the range. Would look to now cover a short or price if needing to on a scale-down basis towards $385.00. July soyoil breaks down below 69c but pops right back. Stronger markets comeback quickly, and would look for a re-test of 70-71c as charts are still slanted upward. July wheat broke its support at $6.75 yesterday but begins over this 50 day moving average today. This chart still appears the one most vulnerable to further lows, with the 100 day average of $6.58 offering up a good short-covering or buying opportunity. July corn prices continue to define a sideways momentum trade, using $6.50 as a baseline low and $6.85 as a high. The ADX has weakened to 23, meaning prices are likely to remain choppy. Would look for now to play the range. December corn prices turn higher but have three tops to contend with for resistance from $5.80 to $5.85. On a firmer start, clearing $5.85 opens the door for a challenge of $5.95 to $6.00, as there is not much back resistance to stop a further climb. Would prefer to own the markets now instead of trying to sell them, given the hot and dry forecasts for the weekend and the fact that weaker markets don’t bounce, as these markets evidently do.
NOVEMBER BEANS: The major trend remains sideways/higher and though the market appeared potentially toppy last week, the trade over and above the $14.00 level towards $14.50 is more suggestive that prices are forming a large sideways trading range heading into the summer and perhaps swing around the $14.25 level. Head and shoulder tops are typically symmetrical in nature, and the trade towards the higher end of the range negates the reversal trade for now. Better support moves up to $13.80, and should cushion another break. The ability to bounce off the lows of the move last week shows more strength than not, while the falling ADX to 24 finds that rallies have a tough time with follow-through. However, given that beans are made in August, would prefer to buy good breaks in this market, and think it is too soon to call a top here. Play the $13.80-$14.40 trading range for a while.
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