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Morning Market Review for Nov. 19, 2019

Weather disruptions, stale news and harvest nearing end. (Comments are updated by 7:30 a.m. Central Time.)

How quick can yesterday’s losses be rejected/reversed?

Editor's Note: Bryce Knorr has retired. 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 5:51, cst:
Dec Corn= 1 higher
Jan Soybeans= 1 3/4 higher
Dec KC Wheat= 1 higher
Dec Chicago Wheat= 3/4 higher
Crude Oil= down 57
Mini-Dow= up 41
Gold= down $4.10
Dollar Index= up 5

Weather:
Some US harvest disruptions will occur during the next 3 days. South American weather is seen as non-threatening, but we have seen early season weather offer strings of dry weather on a rotating basis from location to location, but the more important part of the growing season is still ahead. Weather has not been having much day-to-day connectivity with price action recently.

Global News:
Little market-moving news is visible.

Corn:
Today’s Support/Resistance and Expectations:

Contract

First
Support

Second Support

First
Resistance

Second Resistance

CH

3.77

3.75

3.84

3.94

CN

3.87

3.85

3.95

4.05

CZ20

3.92

3.88

4.02

4.05

*Expectations for Today> Friday and yesterday’s flush likely was a culmination to recent corrective activity. Key longer-term support levels were reached yesterday. Short-term technical conditions are not conducive to building downside momentum. Yesterday’s losses are likely to be quickly rejected. Overall conditions point to short-covering and improving price action unfolding this week and next week.  
 

Soybeans:
Today’s Support/Resistance and Expectations:

Contract

First
Support

Second Support

First
Resistance

Second Resistance

SF20

9.10

9.02

9.28

9.35

SN20

9.45

9.42

9.60

9.67

SX20

9.44

9.39

9.60

9.68

*Expectations for Today> Yesterday’s weakness violated last week’s low by 1 cent. The ability to build downside momentum here should be very limited. Spread action suggests little interest in generating follow-through to yesterday’s performance. Soymeal is unlikely to probe recent lows. Soyoil has had a personality since May of only producing short-lasting corrections and then resuming a trending higher pattern. I see yesterday’s weakness as a temporary aberration. A correction process is coming to an end, we are not building momentum in a down trend. Expect both short-covering and new buying interest to be found this week. Prices can return to probe above Friday’s high yet this week.

Wheat:
Today’s Support/Resistance and Expectations:

Contract

First
Support

Second Support

First
Resistance

Second Resistance

KWH

4.20-22

4.15

4.41

4.50

WH

5.02

4.98

5.17

5.26

KWN

4.39

4.35

4.53

4.62

WN

5.11

5.05

5.28

5.35

*Expectations for Today> Reversal-up action occurred yesterday. Chicago isn’t likely to trade below yesterday’s low. KC could violate yesterday’s low, but if it does, it won’t be able to generate follow-through. Wheat’s correction process is largely over. Overall conditions point to trending higher action unfolding in the weeks ahead, likely pushing above the October highs.
 

Overall Summary/Outlook:

Yesterday’s weakness was a demoralizing event, but it needs to be seen in the context of roughly a month-long correction process. Friday and yesterday’s action is more consistent with culminating activity than it is with trending activity. News is stale. News is sparse. Cash basis tones are firm. US harvest is rapidly winding down and cash buyers will have emerged from the harvest season having accumulated much less than normal cash long positions. This sets the stage for both basis and spreads to strengthen into the winter period in an effort to trigger cash supplies into the pipeline. Normally, processors and feed users can count on elevators/co-ops having a long hedged inventory of physical bushels that will be available on routine pushes in posted bids. This year, we seem to have gone through harvest with these entities having minimal success in building a long basis position and certainly they own much less grain than normal. This means that the cash pipeline will need to rely more on bushels being replenished by the farmer, rather than the elevators. Typically, it is more difficult to entice a farmer to move grain under unfavorable winter weather than it is to entice an elevator to move grain. Also, the elevator can be more easily enticed to move grain through just basis improvements, while the US producer is more focused on flat-price incentives, rather than just basis moves. This may imply that basis may not be able to entice enough movement by itself, but will need futures to seek higher levels as well.

The US has a window between now and say March where it may be able to capture a greater portion of global demand. Global cash markets are not yet structured to do that, but it is likely that they will soon develop that pricing structure.

Technical conditions are NOT conducive to building downside momentum from current levels, but instead could quickly see weakness from Friday and yesterday reversed. Such a development will quickly turn the tables and trigger tech-based buying interest from both new buyers and short-covering energy. With US harvest soon ending and producer grain bin doors closing and unlikely to be soon opened, fundamental support may develop in conjunction with tech-based support. View weakness here as temporary and the final stages of a roughly month-long correction process.
 

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.
DuaneL@netins.net

563-419-1300

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