By: Dan Hueber –
It would appear that I had become a bit premature with my enthusiasm yesterday morning seeing that as it turned out, once the corn market reached the 55-day moving average, and the highest point traded since the shocking November 9th USDA report, funds used the strength as a selling opportunity once again and prices turned lower. March corn went on to post an outside range lower reversal, with wheat not far behind. Do keep in mind that all this did was to keep this market restricted in the existing trading ranges. That said, long-term indicators have turned positive and we hold at what has proven to be a level of value so, bulls may have lost the battle for the day, but by no means the war.
While January bean still failed to close above the psychological 10.00 mark, we are trying to rally once again this morning and have pushed the furthest above the 9.90 range mid-point since mid-October. Support is being derived not only from the recent resurgence in demand but ongoing and possibly expanding concerns about the dry weather in Argentina. Do keep in mind that conditions have improved in Brazil, which could easily counterbalance issues in their neighbor to the south, but of course both nations are early in their respective growing seasons. It is currently estimated that the bean planting in Argentina is just over 42% complete and in Brazil stands around 92% complete. Do keep in mind in the bean market that even with the recent optimism, we remain in a very broad based sideways pattern. As I have pointed out in the past the since the fall of 2014, January bean futures have been contained in a range between 10.65 and 9.10 for 80% of that time (138 weeks out of 172) and currently we are just a bit above the mid-point of the range.
Granted, we need to violate the 10.13 level on a weekly close but it would appear we have the pieces currently in place to make a run for the 10.50/10.65 zone. Do note that that unlike corn, weekly indicators in beans turned higher from the oversold zone back in the summer and have reached the highest point since the summer of 2016 and remain positive.
Other news is generally sparse this morning. The USDA did announce a sale of 162,000 MT of grain sorghum to China. A week from today the USDA will release the December crop production and supply/demand report but of course, there will be no changes in domestic production figure this month. Look for estimates to begin filtering in by the end of the week. Macros was working against the ag’s once again this morning, with weak metals and energies and a strong dollar and equity trade.