Special Market Update
Grain Market Commentary
Monday, December 2, 2019
By Risk Management, The Andersons
The grain market has entered holiday mode with reduced trading volumes, volatility and fresh news. There had been some hope of a Phase 1 trade deal being agreed upon by the middle of December, but that hope has faded after Trump recently signed legislation supporting Hong Kong protesters. China was not happy and accused the US of meddling in their matters. There was a small correction in equities, but the market is barely off its all-time highs. Unless we see some type of trade deal signed, the grain markets appear to be “checked out” until the January crop report. That report will contain much anticipated final production numbers. We should not see any type of yield adjustment on the December report. There have only been 2 times USDA changed yield estimates in December and those adjustments were very small.
The corn market has grinded lower since the middle of October but appears to have found some footing for now. The lack of a trade deal along with poor export demand has allowed corn to work lower but we did find some recent support following 2 weeks of solid new export sales. It was an encouraging sign, but the overall pace is still well below the pace needed to reach USDA estimates. Managed money is short 150k contracts which is modest. The producer remains disengaged for now which continues to support basis levels.
Soybeans have rolled over since the middle of October but found chart support right where they should have at the $8.70 area in January futures. Soybeans continue to suffer from negative trade war rhetoric along with weakness in competing exporter currencies. The Brazilian Real and Argentine Peso are off the recent lows, but it appears that some South American business with China was done last week. At the same time, South American weather is pretty good for now. Brazil has seen timely rains and this trend should continue based on current forecasts. Argentina has been a tad dry, but today’s maps are hinting at some moisture in the extended forecast. Even with the South American export competition, the US had a pretty good week of export sales last week. We were at the high end of trade expectations and the current pace is a bit better than last year at this time. Managed money remains on the sidelines which is a good indicator that they see no price potential in either direction for now.
Wheat has posted a nice 40c rally off the recent lows. There has been some wheat leaving delivery houses and no wheat was put out against the December contract in Chicago. Additional support came on word that Australia was reducing their wheat crop by almost 30% compared to average due to drought. Wheat export sales were strong last week and are running better than the same time last year. The small rally in wheat was encouraging but domestic and global supplies are still historically burdensome. Managed money is not on board one way or another with their current position flat.