Weekly grains outlook: Soybeans start year on up note

Soybean Fundamental Support

Soybeans started the year on an up note as all three legs of the complex closed higher. A dryer forecast for Argentina provide the support to the market while weak exports continued to weight on the market. Argentina received weekend rains of 0.60 - 1.30 inch for about half the production region. This was lower than anticipated. Weekend highs were mostly 94 - 99 degrees with some areas above 100. Almost no rains are seen through Wednesday. From Thursday through Saturday, minimal rains of up to 0.50 inch will be seen. Heaviest totals will come to one inch. Combined with the above normal temperatures, all areas will see net drying this week.

Weekly export inspections came in at 1.139 at the lower end of trades expected range of 1.1 to 1.3 mmt. This week’s sales were below last year’s same week exports which came in at 58.4 mmt and were the lowest weekly shipments since September. Weekly shipments have failed to exceed last year’s numbers in 13 of the last 14 weeks. Exports are now running 14% below last year’s pace. The United States will have to ship out a record 33 million bushels a week to hit the USDA export target. This is highly unlikely. The question is how aggressive will the USDA when they make adjustments to the export figure on next week’s report.

We would encourage producers to use rallies to the $10.00 levels in both the old crop as well as new crop to make catch up sales due to the increasingly bearish fundamental situation we find ourselves in.  Worst case scenario that we currently see is for the beans moving lower and test their contract lows. The wheat and corn contracts made lows on their recent move lower; unfortunately, it’s not out of the realm of possibility that beans do the same.


 

Corn Fundamental Support

Spill-over support was seen from the wheat market today along with what might have been small fund short-covering. Any fund help is questionable because there wasn't the typical large scale volume spikes where they really stand out so it's best to say that today may have seen light fund short covering but nothing aggressive. Wheat spent the day trading strong on winter kill concerns over the weekend, which certainly offered some help to corn.

On Tuesday's bounce the March hit a two-month downtrend line which limited how far corn was willing to move higher. This trend line is not major resistance on the chart but strong enough to require corn to have its own positive news to take it out, not just following wheat higher. Better volume trade returned to the corn market today which is a pattern we would expect to continue at least until seeing the numbers from the January crop report.

Friday's COT report showed funds were light buyers of 15,500 contracts, good news for corn bulls but not large enough to suggest they will continue to cover their 207K shorts just yet. All attention will be focused on the report next week with weekly exports and ethanol likely having a small influence on this market. There is strong enough demand in this market to expect this report could be positive but also enough fear at a potential yield increase to limit buyers for now.

Bulls

•           Bulls will continue with hopes that the new year will result in funds covering shorts in corn and putting that money somewhere else

•           If March can take out the downtrend line it would open up the chart to the high from December of 360 1/2

•           If USDA lowers yield even half a bushel on the Jan report it would ease up long standing negativity this market has about bearish news getting more bearish

Bears

•           There is a small downtrend still in place and sellers likely targeted the downtrend line today as a point to get short today

•           With trade having a bearish bias going into the Jan report all that bears need is for someone to hint at higher yields and most traders will likely believe it

•           With funds nearly record shorts all bears should keep a close watch on that group, any short covering would cause quick problems for those short


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About the Author

Ryan Ettner, Jim McCormick and RJ Meyer are grains analysts at Allendale Inc.