Grains market reacts to USDA reports

January 16, 2018 09:40 AM


Soybeans and products                                    
General Comments: Soybeans and products were higher in reaction to the USDA reports. USDA cut yields and left harvested ├írea unchanged for lower than expected production at 4.392 billion bushels. U.S. ending stocks projections were a little lower than expected at 470 million bushels, and world stocks were lower than expected at 98.6 million tons.  The lower stocks levels came even as USDA reduced export demand by 65 million bushels due to the strong competition this year from Brazil and Argentina in the world market and some concerns about the quality of US Soybeans produced last year.  Stocks as of December 1 were a Little higher than expected and were just above 3.15 billion bushels. 

On Thursday, CONAB estimated Brazil soybeans production at 110.4 million tons, which should be about in line with trade expectations. Traders had expected bearish reports for soybeans, with many saying that U.S. ending stocks levels could be well over 500 million bushels because of the weak demand. USDA has accounted for the weaker demand and still kept ending stocks levels at much more moderate levels than the most bearish trade expectations. 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. Northeast Brazil has also been dry and is missing out on the current rains, 

Chart Analysis:  Trends in Soybeans are mixed to down with objectives of 948, 945, and 939 March.  Support is at 949, 944, and 938 March, and resistance is at 968, 970, and 977 March.  Trends in Soybean Meal are mixed.  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 3270, 3250, and 3220 March, with resistance at 3360, 3370, and 3390 March.

Canola and Palm Oil 
General Comments:
Canola was higher along with Chicago and in response to the USDA reports on Friday, then turned lower on Monday. 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 Friday, but a Little higher yesterday 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.

Overnight News: SGS said Malaysian palm oil exports so far this month are 564,968 tons, from 581,254 tons last month.  ITS said that exports are now552,635 tons, from 596,862 tons last month.

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.