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Morning Market Review for Dec. 5, 2019

Technical conditions may be poised to build upside price momentum. (Comments are updated by 7:30 a.m. Central Time.)

Solid export sales data could trigger fundamental-based buying today. Duane Lowry offers marketing insights below.

Overnight Trends:
At 6:08, cst:
March Corn= 3/4 lower
Jan Soybeans= 1 1/2 higher
March KC Wheat= 3/4 lower
March Chicago Wheat= 3/4 higher
Crude Oil= up $0.21
Mini-Dow= up 110
Gold= down $0.40
Dollar Index= down 15

Weather will bring the coldest temps of the year to the Midwest next week. Both U.S. and South American weather has not been impacting day-to-day market action.

Global News:
The UN’s Food and Agriculture Organization (FAO) says global food prices are currently the highest in more than 2 years. Prices increased 2.7% from October to November and were up 9.5% from last year. Meat prices rose 4.6% in November, marking the highest one-month surge in more than 10 years. Vegetable oil prices increased 10% from October to November.  

OPEC is meeting and is expected to maintain production cuts that were established 3 years ago, with some expecting them to agree to further production cuts.

China’s Commerce Ministry spokesman indicated the U.S. would need to rollback tariffs accordingly if a trade deal is to be achieved. The spokesman said U.S. and Chinese negotiators are in close communication. The word “accordingly” appears to me to be a new slight twist, as China’s demand was that all tariffs needed to be rolled back.

House Democrats are feeling the political pressure on the U.S.-Mexico-Canada Agreement, suggesting they may be close to passage, but Speaker Pelosi seeks to strip out the legal protection offered for online content, which would be a major setback for large technology companies. Mexico is also pushing back on demands from Democrat legislators that Mexican factories would be subject to labor inspections.  

*Export Sales data will be released at 7:30 this morning. Here are the trade estimates: Wheat= 250-700 tmt, Corn= 500-950 tmt, Soybeans= 600-1150 tmt, Soymeal= 100-250 tmt, Soyoil= 5-20 tmt.  

Today’s Support/Resistance and Expectations:


Expectations for Today> Significant support exists around yesterday’s low. Short-term technical conditions are poised to quickly reverse yesterday’s declines. Expect upside momentum to build in the days ahead. 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> Overnight trade eclipsed Monday’s high, trading nearly 16 cents off Monday’s low. Support will build on probes below the overnight low.
**Inter-market spreads suggest that soybeans are historically extremely cheap, trading in the bottom 8% of relationship values to corn experienced during the past 12 years.
**In fact, at no time prior to U.S./China trade disruptions did soybeans trade at current price relationship values (to corn) in the past 12 years.
If any narrative develops between now and spring U.S. planting that suggests soybeans need to “buy” acres, the price strength required to do so will be very dramatic.
***Soybean Bears are playing with fire in a very bad way here. If they don’t realize that, then it is only because they are not a student of history—they have no concept of just how much “in the hole” they are establishing short positions here.    

Today’s Support/Resistance and Expectations:


Expectations for Today> Support is likely to build above yesterday’s lows. Expect trade above this week’s high to unfold in the days ahead. Wheat may lose to corn and soybeans during the next 60 days.

**KC Wheat seems to be unreasonably cheap vs Chicago and this has been an ongoing situation.  

Overall Summary/Outlook:
Minor weakness early this morning is likely to unearth technical support. Short-term technical conditions seem conducive to building upside momentum today.   

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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