Advice: We advise corn hedgers and cash-only marketers to enter a standing order to sell another 10% of 2019-crop in the cash market if March futures hit $4.01.
Price action: Corn opened lower and closed in the bottom third of today’s range. March corn was down 3 cents to $3.87 and December 2020 dropped 2 cents to $4.00.
Fundamental analysis: Futures closed near the late-session lows as buying waned following the sharp four-day rally on news of a tentative China trade deal. The Trump administration confirmed reports earlier today that it will move forward with finalizing a rule on U.S. biofuel blending requirements for 2020 that is in line with a plan the Environmental Protection Agency unveiled in October. The move is likely to draw anger from farmers and ethanol advocates, who say that the plan does not go far enough in adjusting for refinery waivers that reduced demand. Corn and rins both fell on the news Wednesday.
Chinese commodities trader COFCO, Brazilian grains group AMaggi and a Shell-Cosan joint venture are working on plans to build their first corn ethanol plants in Brazil. Corn ethanol is ready for the big time in Brazil, where sugarcane has been virtually the only source of ethanol in the world's No. 2 producer of the biofuel. The impact on commodity markets could be far-reaching, as new plants challenge U.S. ethanol for sales in northeast Brazil and slow Brazil corn exports, which grew fourfold in the past decade.
South American weather leans negative with more rains in the next week keeping crop conditions favorable in Brazil and shrinking the dry area in Argentina from a third of the production belt to less than a quarter in the coming week.
Traders will be watching the weekly USDA export sales report for the week ended December 15, on Thursday morning. Traders are looking for old-crop corn sales to jump to 1.2 million metric tons (MMT) to 2.0 MMT from 873,525 a week earlier. New-crop sales may have expanded to 525,000 to 700,000 MT.
What to do: Get current with advised 2019-crop sales to take advantage of strong basis and the price recovery. We’ll wait on the next push to the upside to start 2020-crop sales.
Hedgers: NEW ADVICE -- Enter a standing order to sell another 10% of 2019-crop in the cash market if March futures hit $4.01. You should be 50% priced in the cash market on 2019-crop.
Cash-only marketers: NEW ADVICE -- Enter a standing order to sell another 10% of 2019-crop if March futures hit $4.01. You should be 50% priced on 2019-crop.
Advice: We advise soybean cash-only marketers to enter a standing order to sell another 10% of 2019-crop in the cash market if January futures hit $9.40.
Price action: Soybean futures finished steady to fractionally lower through the August 2020 contract. The November 2020 contract ended 1 3/4 cents higher. Meal futures finished 60 cents to $1.40 higher. Soyoil futures dropped 35 to 39 points.
Fundamental analysis: Corrective trade was seen in the soy complex today. Soybeans faced some mild profit-taking in 2019-crop contracts, while traders also unwound bull spreads. Unwinding of long soyoil/short meal spreads was the dominant feature in the product markets.
Focus tomorrow could return to a more fundamental focus as weekly export sales data should help guide price action. Traders expect soybean sales for the week ended Dec. 12 to total between 950,000 MT to 1.4 MMT. The bottom end of that range of estimates is low given that daily sales announcements during the period totaled 725,000 MT. It wouldn’t be a stretch to see sales top the upper end of the range. Bottom line: The export sales data shouldn’t be bearish and may provide a bullish surprise.
Technical analysis: The technical picture for soybeans continue to favor bulls, with today’s modest inside day down for the March contract just a pause in the uptrend from the early December low. Tuesday’s high at $9.43 1/4 is initial resistance, with stronger resistance layered from the November high at $9.55 to the October high at $9.70. Key near-term support is at the 50-day moving average at $9.31 3/4. The uptrend drawn off the early December lows intersects around $9.28 1/2 on Thursday and rises about 4 cents each day.
What to do: Wait on an extended price rebound before making sales. Be prepared to advance 2019-crop sales and start 2020-crop marketings on the next round of sales.
Hedgers: You should be 50% priced in the cash market on 2019-crop production.
Cash-only marketers: NEW ADVICE -- You should have a standing order to sell another 10% of 2019-crop if January futures hit $9.40. You should be 40% priced on 2019-crop production.
Price action: Futures opened lower and closed in the lower 25% of today’s trading range. March SRW futures fell 8 cents to $5.48 ¼, with March HRW futures sliding 4 ¾ cents to $4.62 ¼. Spring wheat futures were down ¼ cents to 1 ¼ cents.
Fundamental analysis: Futures were under pressure with the trade deals and agreements factored into prices and now market bulls need to see improvement in exports. U.S. wheat export sales in the week ended Dec. 15 are expected to total 200,000 MT to 600,000 MT, compared with 502,674 MT a week earlier, a Reuters survey showed.
The world market remains well-supplied and U.S. wheat is not competitive into many importing nations. China sold 50,599 MT of 2014 through 2018 wheat at its latest reserve auction, which represented just 1.7% of the total that was offered, the country’s trade center reports. The reserve wheat sold for an average price of 2,321 yuan ($331.74) per metric ton. U.S. wheat is offered at $258 to $298 for delivery into Asia. Yellow rust will likely curb China’s wheat production in 2020, as the disease has spread to key production areas in eastern and northwest areas of the country, the National Agricultural Technology Promotional Center said in a report this week.
Technical analysis: March futures rose yesterday to the highest since June 28 and ran out of momentum, opening lower last night and finishing closer to session lows. March did not break Tuesday’s low and closed above the Nov. 29 swing high at $5.46, which becomes short-term support. Stronger support will be found at $5.39 ¼.
What to do: With prices rebounding, be ready to increase old- and new-crop sales on signs the rally is running out of steam.
Hedgers: You should now be 60% sold in the cash market on 2019-crop Also, you should be forward contracted on 10% of expected 2020-crop wheat via hedge-to-arrive contracts for harvest delivery.
Cash-only marketers: You should now be 60% sold on 2019-crop. Also, you should be forward contracted on 10% of expected 2020-crop wheat via hedge-to-arrive contracts for harvest delivery.
Price action: March cotton futures closed up 30 points at 66.74 cents. Prices closed near the session low.
Fundamental analysis: The cotton market has been struggling to extend last week’s gains that came from a bullish monthly USDA supply and demand report, stronger weekly U.S. export sales and the news of a U.S.-China trade deal. Cotton traders want to see more China purchases of the fiber showing up in USDA sales data, before becoming too bulled up. Also, U.S. officials claims of China’s annual purchases of U.S. farm products to jump to between $40 billion and $50 billion over the next two years--as much as double the pre-trade war values—have veteran cotton market watchers skeptical. Beijing has been unwilling to confirm it plans to purchase any specified amount of American agricultural goods.
A stronger U.S. dollar this week is a bearish outside element that is working against the cotton market bulls. However, that’s being mostly offset by a booming U.S. stock market that saw the stock indexes hit record highs this week, and by some upbeat economic data coming out of China earlier this week.
Focus of cotton traders now turns to Thursday morning’s weekly USDA export sales report, with bulls hoping for a trend of better sales and shipments to continue.
Technical analysis: Cotton bulls have the slight overall near-term technical advantage as prices last week pushed to a five-month high. However, the bulls need to show more power to keep their advantage. The next upside price objective for the cotton bulls is to produce a close in March futures above solid technical resistance at the July high of 69.07 cents. The next downside price objective for the cotton bears is to close prices below solid technical support at the November low of 63.70 cents. First resistance is seen at today’s high of 67.18 cents and then at this week’s high of 67.47 cents. First support is seen at today’s low of 66.25 cents and then at 66.00 cents.
What to do: Get current with advised sales. We plan to set a new sales target above the market, but we want to reassess the price outlook after some of the U.S./China trade dust settles.
Hedgers: You should have 65% of 2019-crop priced in the cash market.
Cash-only marketers: You should be 65% priced on 2019-crop.