While China has not returned to buy U.S. corn since the spring, rumors popped up Friday regarding China buying U.S. corn last week. Even without China, corn export sales are the second highest for this time of year. In the weeks ahead, the U.S. should be well positioned to garner additional business as it competes with Ukraine. The negative influence hanging over corn and other commodities is the expansion of COVID variants and the ensuing travel restrictions and lockdowns that could occur.
MARCH CORN FUTURES:
In in the absence of a La Nina-induced expansion of drought in southern Brazil and Argentina, there is probably a limit as to how high corn futures can go in the short run. A rally and close above $5.94-$5.95 is likely to find additional buying with a run at the $6.00 to $6.25 area very possible. The corn basis is hinting at new export business and, though ethanol production slipped last week, the domestic basis also hints at strong domestic demand. March corn remains in a wide range, bounded by $5.50 on the downside and $5.95 on the upside.
JANUARY SOYBEAN FUTURES:
Although the fundamentals for soybeans do not appear to warrant much higher prices, the recent rise above the 50-day moving average and the solid rally last week appear to give January beans another shot at the $12.90 to $13.00 area. A rally and close above that area is likely to lead to another leg higher. However, unlike corn, soybean export sales are down 29% from a year ago, with inspections off 23%. Expectations are for the USDA on Thursday to lower exports and raise carryout on soybeans, which would certainly limit the upside. The window is closing fast for a catch-up in sales with Brazil new-crop very competitive in January.
KC MARCH WHEAT FUTURES:
Even though wheat fundamentals remain solidly bullish both in the U.S. and globally, it appears Kansas City March could have more weakness ahead. In the U.S. the forecast remains mostly dry for the southwestern and Southern Plains hard red winter areas. Add to that the fact that major exporter stocks are sitting at a 14-year low and we have reason to feel that wheat prices should go higher. However, the current correction in KC wheat, which amounted to 45 cents last week, does not appear to be over. It looks like KC March has a shot at the $7.90 to $8.00 support area.
Comments above are for educational purposes and are not meant to be specific trade recommendations. The buying and selling of grain and soybean futures involve substantial risk and are not suitable for everyone.
Dana Mantini can be reached at Dana.Mantini@DTN.com
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