Morning Highlights


Highlights

  • It has been consistent all week long that the market is working off very little fresh news.After Trump has stated that he will enact additional tariffs if an agreement isn’t signed by Dec 15, Xi stated he is not afraid to take additional action against the US.So we sit and eagerly watch for the next tweet.Treasury yield tick lower due to the uncertainty.
  • With the lack of news, the market is centered on unwinding or spreading out of Dec futures as we approach first notice day.
  • Yesterday’s export sales report was solid for beans and wheat but corn still on a slow pace.Today the commitment of traders will be released after the close.
  • The signup period for the 1-year fall 2020 and the 2-year fall 2021 CHS Pro Advantage programs close December 11, 2019, for more information click: www.chshedging.com/chs-pro-advantage
  • First notice day for December futures is November 29th so with Thanksgiving the day prior, longs will need to be out of their positions on the 27th or risk delivery.

 

Corn

  • Positive margins in the ethanol sector about the only story with corn.This is driving the strong country basis levels in the east and supporting the west from the normal pressure that is seen when export sales are poor.Still a lot of questions about the ramifications of the lower test weight but the market will decide on how to work through this situation.
  • Quality needs will keep a wide array of basis levels for the foreseeable future.If heavier test weights are required, basis will be stout and if lower is ok, more reasonable basis will be available.Meeting deliverable quality could be tricky and expensive so we shouldn’t see any deliveries going into December delivery period.
  • Technically, corn continues to hold the key support at $3.66.If this area holds which still is not certain, a recovery to the $3.74 to $3.80 is possible.Those would be the key Fibonacci retracement levels for a short-term recovery.Downside risk is to $3.58.We are still fighting the weak seasonals so still too early to say this current support will hold.
  • Spreads have weakened a bit.CZ/CH at 10 ¼ cents, CZ/CN at 21 ½ cents.

 

Outlook: Steady calls for the open as the market positions itself for first notice day.

 

Oilseeds

  • Soybean exports were better than expected yesterday but the market doesn’t seem to care much.After the initial support, the market finally thought it was time to cover the gap and test the $9.00 support.Beans now are trying to figure out what to do next.
  • The crush margins are remaining steady with oil still leading the way.Meal continues to try to hold onto the psychological $300 level but having some difficulty doing it.Downside support is at $297.50 which likely will hold if we see any pressure.
  • Technically, beans broke the support levels so additional downside is possible.The next support is at $8.80.Whether or not it needs to dip there remains to be seen but is we have continued uncertainty with a resolution with China, a 20-cent dip is looking more likely.
  • The Bean/Corn ratio is currently at 2.44, which has weakened into the middle of the range.If we drop to $8.80, there is still plenty of room in the trading range to hold corn steady and pressure beans.The range appears to be 2.30 to 2.50 so beans could conceivably drop 50 cents and still hold that range.
  • Spreads are still widening further, SF/SH at 14 cents and SF/SN at 39 ¼ cents.

 

Outlook: Beans are called 1-2 lower and waiting to see if the market wants to pressure it further.

 

Wheat

  • Chicago continues to lead the market as we see the spreads with KC and Mpls widen out to unprecedented levels.For good quality, SRW can just about make the price it wants since there farmer selling is light and there is such a need for blending.
  • Mpls wheat is a complete dog right now.It broke past the psychological $5.00 level and still not showing much.Spot bids have been very solid but little difference for 14’s versus 15’s so it is confirming that the market is looking for quality not proteins.
  • Chgo/KC ratio off its peak of 1.30 currently at 1.21 but still at all-time high levels.Appears KC will just follow Chicago.
  • With Chicago showing $5.00 as key support, nearby resistance is at 5.16 ½ and then at $5.20.Without some help from corn, wheat likely will have some limitations to any rally.
  • Spreads this morning: Chicago Z/H 3 cent carry; Kansas City Z/H 8 cent carry; Minneapolis Z/H 14 cent carry.

 

Outlook: Calls are for 1-2 better today.  Spread action likely to be the main driver today.

 

CHS Hedging and Russell Consulting half-day conference is open for registration.

https://etmna.eventsair.com/chs-annual-meeting/2019-russell-non-client

Cost $50 for Non Russell Consulting clients

Wednesday December 4th:
Registration: 12:30 p.m. – 1:00 p.m. Conference 1:00 p.m. – 5:00 p.m.
Social reception: 5:30 p.m. – 6:30 p.m. Dinner: 6:30 p.m

Location: Hilton Minneapolis 1001 Marquette Ave. S.Minneapolis, MN 55403

Speakers and topics:
Dr. Ed Seifried, U.S. ag economy outlook.  Jim Weismeyer, Washington D.C. farm policy Chris Short, Crop nutrient pricing strategies Kent Beadle and Preston Zacharias, Market outlook (grain and livestock)