Wheat market recovers from freeze in United States

January 8, 2018 12:33 PM

General Comments:  U.S. markets closed a little lower on Friday as the freeze even for the central parts of the U.S. began to fade. Much warmer and above normal temperatures are expected for the Midwest and Great Plains for most of this week. The cold temperatures seen through last week have likely damaged some crops in the Great Plains, and mostly in Kansas. 

It also remains dry in most of the Great Plains. The crops in the region are not well established, and the cold had come with little snow cover to protect the crops. Less concern was heard about Midwest crops. The daily and weekly charts show that Winter Wheat trends are turning up. The weekly charts show that winter wheat price trends are sideways. USDA will issue its Winter Wheat plantings reports along with new supply and demand estimates on Friday. Price Group expects all Winter Wheat area at only 30.65 million acres. Hard Red Winter area could be 21.89 million acres and Soft Red Winter area could be 21.89 million acres. Quarterly stocks could be about1.835 billion bushels, and USDA should leave its ending stocks estimates unchanged at 960 million bushels. 

Overnight News: The southern Great Plains should get mostly dry weather. Temperatures should trend to above normal. Northern areas should see mostly dry weather, but light precipitation is posible on Saturday. Temperatures should be below normal. The Canadian Prairies should see mostly dry weather. Temperatures should average much below normal in the east and above normal in the west. 

Chart Analysis: Trends in Chicago are mixed to up with objectives of 462 and 486 March. Support is at 428, 424, and 421 March, with resistance at 437, 443, and 445 March. Trends in Kansas City are mixed to up with objectives of 446, 462, and 464 March. Support is at 424, 418, and 416 March, with resistance at 442, 451, and 486 March. Trends in Minneapolis are mixed. Support is at 617, 612, and 611 March, and resistance is at 632, 646, and 651 March.

General Comments: Rice prices closed higher and trends became more neutral on the charts at the close of the week. Weekly charts still show down trends. The recovery once again came at the end of the day and took just a few minutes to complete as there was no selling interest seen. The Price action from the last couple of days last week would imply that bearish traders have pushed the market to low enough levels and that at least a more two sided trade can be expected this week.

The cash market remains rather quiet so a further move lower is posible. Futures market fundamentals have not really changed, but traders are leaving the market as the open interest has been dropping. The situation for Rice remains somewhat bullish at this time. USDA will issue its latest production and supply and demand reports on Friday. Little overall change is expected on production. Demand has been at least as strong as expected and USDA could increase export demand slightly and reduce ending stocks slightly.

Overnight News: The Delta should get mostly dry weather, but light rain is expected on Sunday. Temperatures should be below to much below normal. 

Chart Analysis: Trends are mixed. Support is at 1170, 1161, and 1152 March, with resistance at 1192, 1195, and 1200 March.

Corn and Oats        
General Comments: Corn closed near unchanged and chart trends appear to be sideways on the daily charts.  Oats were higher and trends are turning up in that market on the caily charts. Weaker demand news from exports and etanol hurt the Price action in Coorn late last week. There are hopes for increased Corn demand from the export market due to cheap prices, and etanol demand remains good. 

However, etanol production was lower in the latest reports, and etanol stocks were higher, implying a slower processing rate again in the next report. Ideas are that the current cold weather can create additional feed demand as more feed is needed for weight gain in the extreme cold and as some Winter Wheat in the region was lost due to Winterkill. More moderate temperaturas are in the forecast for this week and many cattle areas will see above normal readings for the first time in a couple of weeks.

The trade continues to monitor the dry weather in southern Brazil and Argentina. Forecasts for this week are mostly hot and dry. Some crop losses are increasingly possible and the La Nina conditions imply short soil moisture conditions for most of the growing season. USDA will issue its latest production and supply and demand estimates at the end of the week. Price Group expects USDA to estimate Corn production a little lower at 14.453 billion bushels on a yield of 173.9 bushels per acre. Ending stocks should be near 2.263 billion bushels. 

Overnight News: Mexico bought 102,100 tons of US Soybeans.

Chart Analysis: Trends in Corn are mixed. Support is at 349, 346, and 343 March, and resistance is at 354, 360, and 361 March. Trends in Oats are mixed to up with objectives of 255, 260, and 264 March. Support is at 2453, 239, and 236 March, and resistance is at 253, 257, and 260 March.

Soybean and Products                                     
General Comments: Soybeans and Soybean Meal were slightly higher, but Soybean Oil closed a little lower.  Speculative short covering and ideas that Soybeans production in southern Brazil and Argentina are still suffering from dry weather are still the main features of the matket.  Speculators remain very short in Soybeans and Soybean Meal and are trying to reduce these positions. It has been hot and dry in southern Brazil and Argentina areas, and forecasts for this week call for drier and hotter conditions again.

U.S. prices are now cheap enough that China is buying much more from the US, and it might continue to buy depending on the growing conditions the rest of the year in the South.  South America Soybean Oil is expecting to see increased demand as the tariffs on imports from Argentina and Indonesia for vegetable oils and bio fuels become effective. Higher petroleum prices are also a support factor with all of the political problems in Venezuela and now Iran. USDA will issue its production and supply and demand estimates on Friday. Price Group expects production near 4.425 billion bushels on an average national yield of 49.5 bushels per acre. Soybeans quarterly stocks are estimated at 3.150 billion bushels and ending stocks are estimated at 470 million bushels. 

Overnight News: Egypt bought 120,000 tons of U.S. Soybeans and Unknown Destinations bought 132,000 tons of U.S. Soybeans.

Chart Analysis: Trends in Soybeans are mixed to up with objectives of 990 and 1011 March. Support is at 969, 963, and 959 March, and resistance is at 977, 979, and 988 March. Trends in Soybean Meal are mixed to up with objecgtives of 325.00 and 331.00 March. Support is at 319.00, 316.00, and 315.00 March, and resistance is at 326.00, 329.00, and 331.00 March. Trends in Soybean Oil are mixed to up with objectives of 3500 and 3640 March. Support is at 3360, 3330, and 3300 March, with resistance at 3410, 3430, and 3450 March.

Canola and Palm Oil 
General Comments: Canola was a little lower Friday as the market watches Brazil and as vegetable oils worldwide are showing price strength and also the Danadian Dollar that has moved higher. Canola rallied on the ongoing drier than normal weather in Argentina and southern Brazil that might hurt yields and production potential in affected areas.  Farmers are storing crops now as the harvest is over and as they wait for higher prices, but elevators and crushers appear to have good supplies right now. Palm Oil was higher on news that the Malaysian government had suspended export taxes on Crude Palm Oil.

The market has been strong recently due to good export demand, so the elimination of taxes should mean higher prices paid internally to producers and processors. Speculators appeared to be the best buyers as chart trends turned up. Recent export data from the private surveyors showed that exports were above month ago levels for the first time in several months. Ideas are that production could be as strong as in any month in the last couple of years. There is a lot of talk that supplies are more than adequate for demand. 

Chart Analysis: Trends in Canola are mixed to down with objectives of 485.00 March. Support is at 490.00, 485.00, and 484.00 January, with resistance at 500.00, 502.00, and 507.00 January. Trends in Palm Oil are up with objectives of 2690 and 2830 March. Support is at 2550, 2510, and 2490 March, with resistance at 2610, 2630, and 2650 March.


About the Author

Jack Scoville is a veteran futures market analyst specializing in grains, softs, rice, oilseeds, and tropical products such as coffee and sugar. His industry contacts in South America, Europe, Asia, and North America provide him with a unique and comprehensive view of these markets. Jack began working in the futures industry over 30 years ago and spent 10 years working on the floor of the Chicago Board of Trade in various roles, starting with The PRICE Futures Group since it was established in 1988.