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Morning Market Review for Dec. 10, 2019

Today’s USDA reports expected to make small changes. (Comments are updated by 7:30 a.m. Central Time.)

U.S.-China trade talks seem strangely quiet this week. Duane Lowry offers marketing insights below.

Overnight Trends:
At 6:17, cst:
March Corn= unch
Jan Soybeans= 1 1/4 higher
March KC Wheat= 2 lower
March Chicago Wheat= 2 lower
Crude Oil= down $0.04
Mini-Dow= down 113
Gold= up $7.10
Dollar Index= down 11

At 11:00, cst this morning, USDA will issue their monthly Supply & Demand data. 
Here are the trade estimates:
US 19/20 Ending Stocks Estimates:
Corn= 1.859 bil avg, range= 1.479-1.960, Nov USDA= 1.910
Soybeans= 472 mil avg, range= 345-522, Nov USDA= 475
Wheat= 1.0 bil avg, range= 913-1,050, Nov USDA= 1.014

World 19/20 Ending Stocks Estimates:
Corn= 295.6 mmt avg, range= 292.0-298.2, Nov USDA= 296.0
Soybeans= 96.2 avg, range= 94.0-101.9, Nov USDA= 95.4
Wheat= 286.3 avg, range= 283.9-288.5, Nov USDA= 288.3

Weather offers Argentina its best moisture forecast mid/late next week. Rains prior to that will be more limited.  

Global News:
The Federal Reserve will begin a two-day policy meeting today. Interest rates are expected to be left unchanged. However, traders are most interested in their quarterly forecasts of economic growth and interest projections.

Malaysian palm oil prices were down just 2 points overnight in a quiet trade.

U.S. House Democrats are expected to unveil two articles of impeachment against President Trump, abuse of power and obstruction of Congress.

Today’s Support/Resistance and Expectations:


Expectations for Today> Quiet erosion the past few days feels a little like pressing on a spring. The market isn’t saturated with shorts, but for the year-end timeframe it seems that shorts are excessively short and vulnerable to short-covering energy, once started, facing holiday-styled vacuums of selling pressures. If bears can’t find downside energy from USDA, expect bears to seek the exit door. Upside momentum is poised to build rather aggressively in the days ahead, Bears can’t find some encouragement from USDA today. Corn spreads are poised to strengthen significantly during the next 75 days, with Dec20 the weakest link.

Today’s Support/Resistance and Expectations:


Expectations for Today> Yesterday’s values neared first resistance levels, but faltered into the overnight trade. Short-term technical signals are mixed. Post-report bearishness will morph into a buying opportunity. Soybeans have gained notably on corn since the first of the month. If soybeans get a double-digit boost today from USDA, we may see some correction to the 30+ cents soybeans have gained on corn since Dec. 2. Does that mean we should expect a bearish soybean report reaction today, or does it mean that corn will have a better chance at sustaining any bullish post-report reaction, while soybeans may struggle to build upside momentum after today if the post-report reaction is higher? Let’s try to simplify it by saying that soybeans have trapped some bears under the market and therefore could get a notable burst up short-covering on a bullish post-report reaction. However, with values already 35 cents off recent lows, such an upside reaction could falter/correct after the initial reaction, possibly setting the stage for a few days of corrective activity. Corn on the other hand, seems to be holding a rather large short position for this time of year and values are hovering at the bottom side of a nearly month-long trading range pattern. Thus, a bullish post-report reaction in corn could continue pushing values higher, even if soybeans experienced a few days of corrective action. Well, I am not sure that was a simpler explanation, but hopefully it provided a little clarity to my expectations. Overall conditions warn of trending higher soy price themes in the weeks ahead, with 2-4 day corrections likely to be well supported.

Today’s Support/Resistance and Expectations:


Expectations for Today> Weakness is still holding above Friday’s low. Any probing below that level is likely to be short-lived and lack sustainable downside energy. Looking ahead, we are likely to challenge/exceed the November highs, but building upside energy above that level may be a struggle. Wheat has been the weak link of late, with corn and soybeans both gaining on wheat. I am inclined to believe that will be a longer-lasting theme during the next 60 days.  

Overall Summary/Outlook:
Today is all about USDA, but it is really about post-report reactions. USDA is not expected to make notable changes in today’s report, but that is why Webster’s has the word “surprise” in its pages. Reductions in carryout levels today would be quite encouraging, even if the revisions were small. At this point, where traders have begun to accept/fear bearish USDA reports, a supportive tone today might gain a stronger reaction than the “quiet” expectations, that seem rather prominent today, might suggest.

Overall technical conditions will provide support on weakness and limit the ability to build any downside sustainable energy if there is a negative post-report reaction. Soybeans might be the exception to that comment, as key support levels are well below current values, but also well above the Dec 2 lows. 

Duane has been involved in ag business and the futures industry since 1978. From an assistant manager at a large Iowa cooperative to a floor trader and broker in Chicago, Duane has worked with producers and grain elevators to manage futures, basis and spread risk. Duane has been writing daily market commentary since 1987 and currently works directly with producers to market their grain, manage risk and optimize their crop insurance decisions. Duane’ deep experience with basis, spreads and market analysis sets him apart as a crop insurance agent and risk management consultant, helping him to optimize producer marketing decisions.

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