10/1/18

Morning Bullet Points - 10/01/2018

GOOD MORNING—

MARKET HIGHLIGHTS

  • Markets trading much higher out of the gates this morning with corn up 8 cents, soybeans up 13 cents, and wheat up down 2 cents.
  • USDA on Friday surprised the market by putting US corn stocks 130 mbu above the trade guess, which left new longs in the corn market scrambling with corn retracing half of the recent rally off lows.
  • Soybeans on Friday’s report got more bearish with stocks coming in 37 mbu above the average guess.
  • Wheat numbers were generally in line with expectations.
  • Friday’s CFTC report showed managed funds as only net buyers of 28,500 contracts of corn as of Tuesday to reduce the net short to 113,000, net buyers of 15,000 soybeans to reduce the net short to 58,600, and essentially flat wheat to leave them net short 1,000 wheat.
  • US and Canada have reached an agreement to replace NAFTA overnight, which is providing a boost to equity markets overnight.
  • USDA crush will be out today at 2pm CST and is expected to be 169.3 mbu.
  • Corn technically pushed below support at the 20 DMA Friday and is not bumping up against that resistance this morning.  Stochastics have corrected from overbought with.  The market remains range-bound with support at 3.55 and resistance 3.60 and 3.67.
  • Soybeans technically pulled back to support at the 20 DMA near 8.40 before bouncing.  The market continues to consolidate within its recent range with major support at 8.30 and resistance 8.80.
  • Wheat technically is testing trend-line support again with the bottom of the channel in the 5.05-5.10 area.  Long-term trend is higher with stochastics oversold.

WEATHER

  • Widespread rains expected to move through later in the week to slow harvest through the 6-10 period.
  • Things turn drier in the 11-15, but it will be a slow go in a lot of areas.
  • South America has good rains continuing to fall in Brazil, which should help their early crop ratings.

OUTLOOK

  • Disappointing corn demand led to a bearish corn report on Friday.  Bigger beginning stocks on the 2018/19 balance sheets combined with some of the high national corn yields that have been talked about could push US corn ending stocks above 2bbu.  There is a strong tendency for news to follow the market.  On the highs last week, there was plenty of talk that corn yields were starting to come back to earth and that the USDA would have a hard time raising national yields further.  With the beat down on Friday, there is renewed talk that US corn yields will be moving higher.  I don’t have a strong opinion where national yield moves from here, but it usually doesn’t make sense to be overly bearish this time of year when the market is trading just above long-term support and global corn supplies are historically tight.  The report probably reduces some of the upside potential, but I still think the odds are good that prices work higher over time with better selling opportunities likely in the future.
  • Beans saw their beginning stocks work higher on Friday, which will add to the already large forecast for 2018/19 stocks.  The new NAFTA deal may give some hope that a trade deal could be made with China, but trade talk progress continues to be limited there.  Regardless, we’ve got plenty of beans in the US and world to meet demand, which likely means beans will be the weakest leg in the grain complex.
  • Wheat is at important support that needs to hold.  The long-term trend is still higher, but a failure here would not be good.

Fun Fact of the Day:  Coffee beans are actually tasteless until they're roasted.

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