Soybean futures faced a bit of a shocker on the November WASDE report after USDA hiked soy yield to 46.9 million bushels (mb), sending both production and ending stocks higher by 25 mb. That put ending stocks at 245 mb -- about 25 mb higher than trader expectations and October's ending stocks. However, with the ongoing unusual and bullish weather pattern in Brazil, the resulting 22-cent plus drop in futures did not seem warranted.
On Monday, the third straight day of new sales to a combined China and unknown (often much the same) totaling well over 100 mb, along with the soaring soymeal market and no change in Brazilian weather sent January beans to a gap higher opening. While there is a long way to go until Monday's close, as I write this, January beans are extending the strength, and some 22 cents above that gap. Adding to the potential bullishness is the fact that the 20-day moving average is very close to moving above the 50-day average, often a sign of trend change.
The jury is certainly still out, but for now, this should be considered a bullish development. While next weekend the hot and dry northern two-thirds of Brazil is set to get some relief, the current crop stress is real, with extreme temperatures, and the soggy southern Brazil bean fields are expected to again be faced with a deluge of rain this week. Expectations are that up to a quarter of Brazil's soy fields may have to be replanted.MARCH CORN FUTURES:
Along the same lines as above, while the corn yield, production and ending stocks numbers last week were clearly more bearish, with ending stocks rising to a comfortable 2.156 bb, Brazilian weather could give some bullish input to the corn market. Any further delay or replanting in Brazil has the potential to either reduce or push further out corn seeding in Brazil. U.S. corn is now cheaper than Brazil on a FOB basis by more than 30 cents per bushel in December, giving U.S. exporters the edge. Corn futures are certainly approaching a very oversold level. However, currently there is no buy signal. If soybeans rise, and a change in Brazil weather does not occur soon, look for U.S. corn futures to add some premium. The U.S. corn basis at the PNW is up a nickel on Monday, perhaps indicative of new business.
The comments above are for educational purposes only and are not meant as specific trade recommendations. The buying and selling of commodities, futures or options involve substantial risk and are not suitable for everyone.
Dana Mantini can be reached at Dana.Mantini@DTN.com
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