While last week's USDA and WASDE reports were clearly bearish, the corn market reacted in the opposite fashion, rallying a solid 17 cents per bushel for the week and begins the new week stronger again. The market seemed to get ahead of itself with most traders expecting bearish yield and production numbers ahead of the report. However, funds had come into the report net short close to 200,000 contracts of corn and were forced to cover some of that as the market rose. The unusual and tragic derecho wind event that tore through key parts of the central Corn Belt, along with uncertainty following the Farm Service Agency's (incomplete) August acreage numbers, threw just enough questions into the market to overcome what would turn out to be record yield (181.8 bpa), production (15.278 bb) and the highest ending stocks number in 33 years.
While funds still remain short a sizable position, estimated to be just under 160,000 contracts, we could see this rally continue a bit. However, the upside would surely look to be limited in the short run, with the bearish supply considerations above. The forecast is dry, we'll need some finishing rains and some uncertainty remains; but look for solid resistance over the next 10 to 15 cents on new-crop corn.
December Soybean Meal:
Soybean meal, after setting yet another new contract low just six days ago, reversed dramatically last week, as December meal finished up nearly $12 per ton, and some $15 per ton above the contract low. The weekly reversal appears destined to result in more strength ahead. December meal rose above all key moving averages, including the 50- and 100-day.
A solid base of support should contain breaks at $294 to $297 per ton. A further rally into the $307 to $312 area should run into plentiful selling. Soybean crush is expected to continue strong with Monday's National Oilseeds Processors Association (NOPA) report expected to see crush at 172 million bushels (mb), compared to 167.2 mb in June and 168 mb in July of 2019. The recent USDA report estimated China's soybean crush to rise by 3 million metric tons (mmt) to 98 mmt -- another bullish surprise.
December Soybean Oil:
As world vegetable oil supplies tighten, with palm oil again nearing the highest level since January, soybean oil futures have rallied as well, closing higher in six of the past eight weeks. India, the world's largest vegetable oil importer, has ramped up palm, bean and sunflower oil imports versus a year ago, fueled by the reopening of restaurants and hotels.
While December bean oil could be getting a bit overbought, it appears this move higher could continue. A target for December oil is likely in the 33 to 34 cents per pound area, as that seems to be the next area of solid resistance.
Comments above are for educational purposes and are not meant to be specific trade recommendations. The buying and selling of commodities or commodity futures involves substantial risk and are not suitable for everyone.
Dana Mantini can be reached at Dana.Mantini@dtn.com
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