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Morning Market Review for Dec. 13, 2018

How big is China’s demand? (Comments are updated by 7:30 a.m. Central Time.)

Overnight trade

Corn: Steady
Soybeans: Down 1 to 2
Wheat: Up 2 to 6

New purchases break the ice in trade war thaw

Grain futures are mixed this morning while traders wait for official confirmation that China is buying U.S. soybeans again. Look for a flurry of export data out this morning to set the tone for the session. 

Other markets are mixed today. Stocks rallied in Asia and Europe overnight following a rally in the U.S. Wednesday that followed apparent progress in talks between the two large trading partners – and rivals. But U.S. stock index futures gave back additional gains overnight, fighting to hold even.

The dollar is a little weaker as investors see less need for a safe haven. But that’s not helping crude oil, which is struggling to hold above $50 a barrel. Crude oil stocks declined last week on falling production as drillers took rigs out of service, but the decrease was less than some traders hope for. Diesel inventories declined, running counter to trade expectations as Midwest wholesale benchmarks stayed near 14-month lows.

 

Corn prices are steady this morning, recovering from a weak open with slow but steady progress overnight. March futures held to its modest uptrending channel following a gap higher after the trade breakthrough with China at the G20 summit. 

Resumption of soybean shipments to China in coming weeks could move corn trade to the back burner for a while this winter, after a fast start in the first quarter of the marketing year. Weekly sales totals out this morning are expected to run near 50 million bushels following daily announcements of big sales to Mexico by USDA. However, those deals may not have been sealed in time to make the week-ago cutoff for today’s report.

Wednesday’s data on ethanol production for last week showed production down 23,000 barrels a day, cutting stocks a little and helping margins improve. The numbers reinforced USDA’s decision Tuesday to cut its estimate of corn usage to make the biofuel by 50 million bushels. 

Overseas markets are stronger today. January futures in China gained 2.4 cents to $6.956 and March Paris futures in midday trade are up 1.4 cents to $5.165 after adjustments for currencies and volumes. 

The preliminary report from the CBOT showed daily futures volume up 30% to 327,280 while open interest was down 1,856 on light fund short covering.  Registrations along the Illinois River rose by 87 lots yesterday lots, leaving 1,199 in position and 175 lots were put out against December today.

Options volume was down 37% yesterday to 43,593, 58% of it calls with new interest noted in the September $4 put. 

Bottom line: Be on the lookout for basis pushes that could provide opportunities to move a few bushels for cash flow. Corn may be proving a cycle low but good futures rallies won’t come quickly. For more, see my Corn Outlook. For specific recommendations and daily charts, subscribe to our free E-newsletter, Farm Futures Daily.

 

Soybeans are pulling back a little after a back-and-forth overnight session. January futures yesterday faded a probe near the top of the uptrend off September lows, keeping the tone subdued as the market waits for the next shoe to drop in the trade truce with China. 

Confirmation of renewed buying by China could come at 8 a.m. CST this morning, which is when USDA posts announcement of large purchases on its daily wire. The agency announced sales yesterday of 4.8 million bushels to Mexico and 4 million bushels to unknown destinations.

Bids at the Gulf popped four cents Wednesday, suggesting something indeed was up in the market. Reports of Chinese purchases range from 18.375 million bushels to as much as 110 million bushels; China has bought only 21 million bushels from the U.S. thus far. 

But with a huge Brazilian crop coming on, the world has plenty of soybeans to choose from in coming months. Much may depend on China’s overall need for soybeans, in the face of a slowing economy and a government push to reduce the amount of vegetable protein in animal feed.

Weekly export totals out this morning won’t reflect any of the new deals, likely running close to last week’s 32.7 million bushels.

The preliminary report from the CBOT put daily futures volume up 13% yesterday at 259,903 with open interest up 7,991 and only light fund buying noted. Options volume was 62% higher at 74,022, 53% of it calls as traders liquidated January calls that expire at the end of next week while adding puts.

Vegetable oil prices in Asia were mixed today. January soybean oil futures in China edged lower to 33.386 cents per pound but January palm oil futures in Malaysia were up nearly a quarter-cent to 21.20 cents. 

Oilseed markets are mixed. January soybean futures in China posted new contract lows on the U.S. deals, falling 13.1 cents to $12.524 as crush margins remain at the lowest level since 2012 and stocks at ports appear adequate. February rapeseed futures in Paris midday trade are steady at $9.524 and Winnipeg canola overnight was down a penny at $8.222 after adjustments for currencies and volumes. 

Bottom line: While fundamentals remain bearish due to historically burdensome world supplies, charts are trying to take a bullish turn that could keep prices rising. For more, see my Soybean Outlook. For specific recommendations and daily charts, subscribe to our free E-newsletter, Farm Futures Daily.

 

Wheat prices are trying to lead the way higher overnight as futures in all three markets test chart resistance. 

The gains come despite more signs of competition for exports on world markets. The U.S. failed to win any of the latest tender from Egypt, which was again filled with originations from the Black Sea. Weekly export totals out this morning are expected to be under last week’s 26.3 million bushels but still come in above the rate needed to reach USDA’s forecast for the 2018 crop. 

Storms moving through the Delta and Ohio River Valley this morning will keep things wet in the eastern Midwest this weekend, but a drying trend is emerging over the next week. The official6 to 10 and 8 to 14-day forecasts out yesterday call for above normal temperatures and below normal precipitation though the the latest updates from the ensemble model this morning aren’t quite as dry.

Overseas markets are mixed today. January futures for Eastern Australian Wheat fell 7.9 cents to $8.575 and March futures in Paris midday trade are up 2.5 cents to $6.42 after adjustments for currencies and volumes.

Volume in soft red winter wheat fell 6% yesterday to 86,993 on open interest that was up 5,747 despite light fund short covering. Registrations in Toledo fell by another 7 lots yesterday to 75 and only 4 contracts were put out today. 

HRW volume fell 19% to 32,644 on open interest that was down 1,064. Only 4 lots were put out today in Kansas with nothing either against Minneapolis December. 

SRW options volume rose by a third to 32,127, 62% of it calls as traders added March calls and puts.

Bottom line:Wheat is trying to break free for a rally that could be a selling opportunity. For more details on the outlook, see the Wheat Outlook. For specific recommendations and daily charts, subscribe to our free E-newsletter, Farm Futures Daily.

 

 Explanation of pivot points. 

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This information is not to be construed as an offer to sell or a solicitation or an offer to buy the commodities herein named. The factual information of this report has been obtained from sources believed to be reliable, but is not necessarily all-inclusive and is not guaranteed as to the accuracy, and is not to be construed as representation. The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results.
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