By ADM Investor Services Research Team
January soybeans was able to avoid a “lower low” for the first time in 9 sessions as it found mild strength during Tuesday’s inside-day trading session. However, this was impressive price action following the overnight news that President Trump indicated that there was no deadline on a trade deal with China, and perhaps it might be better to wait until after the 2020 elections. The soybean market has already closed lower for eight sessions in a row and remains extremely oversold basis traditional technical indicators. RSI was at 10.4 this morning and slow stochastic measures were at 3.8 and 3.9. March soybean oil spent most of the day in positive territory with gains in palm oil overnight helping to support. March meal traded higher with an inside trading session. With all of the bearish news, it seems possible that the market may see some short covering ahead. Fund traders have shifted from a net long to a net short position in the COT report and open interest yesterday was up nearly 19,000 contracts on the day and that suggests an even larger net short position, and an even more oversold condition. Keep in mind traders are pricing in good weather in South America and world ending stocks are projected to drop significantly. If there are any issues with weather in South America, stocks could tighten further.
March corn kept within a 4 1/2 cent price range before finishing Tuesday’s trading session near unchanged levels, but it was able to hold its ground above the key downtrend channel off of the July and October high. In addition, a higher close today may help confirm that a short-term low is in place. With the China news overnight, it appears significant that corn remained fairly well supported given the bearish demand news. Perhaps traders have already priced in large crops in South America and continued weak demand in the US. There was talk that Brazil corn inventories could be very tight and perhaps even insufficient to meet local demand into early 2020. Brazil has been an aggressive exporter of corn over the past six months, and this could leave them short on corn in order to feed their livestock herd. Livestock production is expanding rapidly in Brazil as China has been an aggressive importer of Brazil pork and beef. As a result, a moderate recovery in the Brazilian currency this week may have provided some measure of support to corn prices. In addition the market is seeing too much corn left in the fields, especially in North Dakota.
The wheat market followed corn and soybeans higher early on, but then took a sharp turn to the downside before finishing Tuesday’s trading with a new 1-week low and a sizable loss. The market traded sharply lower on the session as traders fear we are nearing the high end of a trading range. Egypt bought 295,000 tonnes of wheat in their tender from Russia, but their price of $221.90 per tonne was seen as disappointing by the market. There are still no deliveries against the December soft red winter wheat contract there were 11 deliveries against the KC December wheat contract. Minneapolis wheat had 17 deliveries against that December contract. The market is overbought technically with stochastics up near 80 at Monday’s close. Lower estimates for Australia and Canadian wheat production as well as extended weakness in the US dollar failed to provide much support to wheat prices during today’s action.
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