Low supply: will wheat price continue rising?

January 12, 2018 11:18 AM


Soybeans and products                                   
General Comments: Soybeans and products were lower on fund selling. Traders expect bearish reports for soybeans today from USDA and are also watching the weather in South America. The trade anticipates that USDA will cut export demand estimates on Friday due to the lower level of export sales through this week. USDA could easily cut 50 million bushels from the demand estimates due to the reduced export pace, and some say that the lost export demand could be double that total.  Lost demand could push Soybeans ending stocks well above 500 million bales.

There is talk that Soybeans will need to trade well below $9.00 per bushel in an attempt to cut US crop production in the coming year. Ideas that Soybeans production in southern Brazil and Argentina are still suffering from dry weather are still the main features of the market. 

However, there is rains forecast for next week in the driest areas, so some of the recent buyers started to sell. Speculators remain very short in soybeans and added to these positions yesterday. USDA will issue its production and supply and demand estimates on Friday. Price Group expects production near 4.425 billion bushels with 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. 

Chart Analysis:  Trends in Soybeans are down with objectives of 948, 945, and 939 March.  Support is at 949, 944, and 938 March, and resistance is at 961, 968, and 970 March.  Trends in Soybean Meal are down with objectives of 313.00, 306.00, and 199.00 March.  Support is at 312.00, 309.00, and 305.00 March, and resistance is at 318.00, 320.00, and 323.00 March.  Trends in Soybean Oil are mixed.  Support is at 3300, 3270, and 3250 March, with resistance at 3370, 3280, and 3410 March.

Canola and Palm Oil 
General Comments:  Canola was lower yesterday. The market is watching Brazil and as vegetable oils markets worldwide.  Farmers are selling in small to moderate amounts and cash markets inside Canada are reported mostly quiet.  Export demand is said to be quiet due to the strength in the Canadian Dollar.  Palm oil was lower on action in the other vegetable oils markets and in delayed reaction to the monthly MPOB data that showed production increasing more than demand. 

Demand can remain strong as the Malaysian government has cancelled export tariffs for now.  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 oil are mixed to down with objectives of 485.00 March. Support is at 490.00, 485.00, and 484.00 January, with resistance at 498.00, 500.00, and 502.00 January. Trends in palm oil are mixed to down with objectives of 2400 and 2300 March. Support is at 2560, 2550, and 2510 March, with resistance at 2610, 2630, and 2650 March.

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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.