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Morning Market Review for Nov. 18, 2019

Trade news, pressure on yields and early holiday doldrums. (Comments are updated by 7:30 a.m. Central Time.)

Is the recent correction process fully mature?

Editor's Note: Today marks a milestone at Farm Futures as Bryce Knorr officially retires. Filling in until a new analyst is up to speed for the team is Duane Lowry, Ag View Solutions. You can learn more about Duane at the end of this story.

Overnight Trends:
At 5:49, cst:
Dec Corn= 1/4 lower
Jan Soybeans= 1/4 higher
Dec KC Wheat= 3/4 lower
Dec Chicago Wheat= 1 1/4 lower
Crude Oil= down 17
Mini-Dow= up 75
Gold= down $9.30
Dollar Index= down 6

Global News:
US/China trade narratives remain supportive and optimistic from both US and Chinese officials, as well as official Chinese media reports. US press reports and US followers have become much more numb with both “happy talk” and concerning headlines. That said, indications continue to suggest that we are in fact nearing a completed Phase One trade agreement.

Hong Kong police gave an ultimatum to protestors at a University and eventually the University was in flames as protestor lit fires and petrol bombs as police used tear gas to regain control of the University and arrest hundreds of protestors.

Today’s Support/Resistance and Expectations:


*Expectations for Today> Friday’s flush likely was a culmination to recent corrective activity. Short-term technical conditions are not conducive to building downside momentum. At worst, today will be a consolidation performance, but overall conditions point to short-covering and improving price action unfolding this week.  

Today’s Support/Resistance and Expectations:


*Expectations for Today> Recent price action has been constructive and last week’s low may not be challenged again. Expect both short-covering and new buying interest to be found this week. We seem capable of pushing above Friday’s high rather quickly.

Today’s Support/Resistance and Expectations:


*Expectations for Today> Wheat’s recent corrective weakness should be nearing its end. Reversal-up action is a possibility today. Overall conditions point to prices soon turning back up.

Overall Summary/Outlook:
Tech-based corrective weakness is becoming rather mature in most arenas, suggesting further tech-based weakness potential should be limited. Fundamental negativity associated with the weight of harvest has been rather questionable throughout harvest, as its delayed and strung-out nature has limited selling pressures, while at the same time making users more aggressive and nervous.

Producer yield reports continue to suggest USDA may need to further lower corn and soybean yields. Reduced producer yields and elevated harvest costs, such as drying, has producers reluctant to make sales this early in the marketing season when gross revenue just doesn’t meet expectations. Basis is likely to remain firm and further strengthen once harvest completes. Spreads should be firm through at least the next 90 days. Most bearish sentiment during the next few/several months is likely to be focused on new-crop 2020 positions. Hopefully, we can soon finalize a US/China trade agreement and see China return more robustly to the US for soybeans and products, along with US meat, ethanol and hopefully corn. Global corn demand has been good and US competitors from South America have already been historically aggressive with corn exports. This leaves an opportunity that US corn exports may gain a greater share of global demand that takes place during the next 3-5 months.

Many have been concerned by recent weakness and daily lethargic price action, fearing that the holiday doldrums may have started early and could linger into the final days of December. This is a reasonable and understandable concern, but that is not the case every year. Having just experienced a correction process that is nearly a month long, this may set the stage for more improving price action to unfold into year-end. Cash markets are already rather robust from a historical basis perspective and IF cash basis values further strengthen during the next few weeks, futures may also be inspired to strengthen as well.

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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