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Morning Market Review for Dec. 11, 2019

Quiet overnight weakness, but will it find follow-through during the day session? (Comments are updated by 7:30 a.m. Central Time.)

U.S. and China are backed into a corner with scheduled Dec 15 tariff increases. Duane Lowry offers marketing insights below.

Overnight Trends:
At 6:14, cst:
March Corn= 1 1/2 lower
Jan Soybeans= 1 3/4 lower
March KC Wheat= 2 1/4 lower
March Chicago Wheat= 3 lower
Crude Oil= down $0.28
Mini-Dow= down 24
Gold= up $2.20
Dollar Index= down 12

Recap of yesterday’s USDA report data. 
US 19/20 Ending Stocks Estimates:
Corn= 1.910 vs estimates of 1.859 bil avg, range= 1.479-1.960, Nov USDA= 1.910
Soybeans= 475, vs 472 mil avg, range= 345-522, Nov USDA= 475
Wheat= 974 mil, vs 1.0 bil avg, range= 913-1,050, Nov USDA= 1.014

World 19/20 Ending Stocks Estimates:
Corn= 300.6, vs 295.6 mmt avg, range= 292.0-298.2, Nov USDA= 296.0
Soybeans= 96.4, vs 96.2 avg, range= 94.0-101.9, Nov USDA= 95.4
Wheat= 289.5, vs 286.3 avg, range= 283.9-288.5, Nov USDA= 288.3

Yesterday’s report data can best be summarized rather simply—statistically insignificant.

Weather provides very warm temps for Argentina during the next two weeks. Precip opportunities will improve in northern Argentina but remain limited in southern regions for at least the next week.   

Global News:
The Federal Reserve will release their interest rate decision and statement this afternoon.

Malaysian palm oil prices were down 22 points overnight.

Both sides indicate that U.S./China are very close to a deal, but still no deal. China is desperately seeking a delay in the Dec, 15 tariffs, but failing to take the final step of an agreement. President Trump is sending mixed signals as to whether or not he will be willing to delay the tariffs solely for being close to a deal.

Today’s Support/Resistance and Expectations:


Expectations for Today> Narrow range trade continues. Near-term weakness potential is limited. Any probe of this week’s low would be minimal and short-lived, if it occurred. 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> Soybeans have settled higher for the past 6 trading sessions. Overnight weakness is seen by bears as a hopeful sign on impending doom, but they say that from the perspective they have been caught having shorted the market in a hole. Short-term technical conditions offer mixed signals, but it remains possible that this recent price strengthening drive may still have desires to challenge the $9.10 area basis Jan, before encountering enough resistance and having chased enough shorts to then embark on a multi-day correction phase. Overall conditions warn of trending higher soy price themes in the weeks ahead, with 2-4 day corrections likely to be well supported. View strength this week into the $9.10 area as maybe setting the stage for a multi-day correction process.

Today’s Support/Resistance and Expectations:


Expectations for Today> Support levels held nicely yesterday. Despite overnight weakness, we seem capable of building upon yesterday’s reversal-up action in the days ahead. Don’t be surprised if overnight weakness is reversed as the day unfolds.

Overall Summary/Outlook:
Traders were near universally bearish soybeans at the bottom and the past 6 days of consecutive higher settlement prices were viewed by the bears with skepticism each day. Yet, despite having rallied 36 cents from the low during that period, there has been little emotion during the rally and very limited corrective activity. That makes me suspicious that it may not end until we get a day with an emotional upside push, suggesting shorts have raced to the exit door. With wheat now appearing poised for a resumption of strength after several days in a correction phase, and with corn just sitting here for what feels like forever, maybe we are poised to get that rare day or two where all three—wheat, corn and soybeans—are able to close higher together to finish out the week. I say this, knowing that having soybeans up the past 6 days sets me up to look foolish, but the upcoming weekend and the potential of a trade deal being reached with China, should cause soybean shorts great unease, which would be a good excuse for soybeans to experience more strength before this week is over. We will see. 

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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