Soybeans are holding the 50 day moving average. A close below $8.69 in Jan 19 soybeans and a close below $9.1250 in Nov 19 soybeans could send the whole soy complex another leg lower.
Grain Hedge podcast
High Natural Gas demand (for cooling) this spring and summer had drawn down stocks more than expected. The early start of winter and forecasts of a colder winter could be supportive of Natural Gas until February. Coffee has broken out higher as Brazilian producers threaten to limit supply in order increase prices (sounds like the coffee version of OPEC). Gold has consolidated as the stock market stabilizes with support coming in at $1220.
The USDA released the Oct WASDE at 11am central and the report is less bearish than expected, which is causing a modest rally in the grain and oilseed markets.
Tech stocks lead the markets lower today as the ten year interest rate is 3.25%, a high we have not seen since 2011. The two year interest rate has not been this high since 2008! The pace of interest rate increases is what fund managers are really concerned about. I think a lot of the big money managers are caught off guard and not hedged enough in the market. If they are following the old hedge fund play book, they should be selling the emini S&P futures against their long positions.
The US, Mexico, and Canada announced on Sunday their new trade agreement. It is being billed as the new and improved NAFTA, and will now be called USMCA (US-Mexico-Canada Agreement). The ag markets have been trading higher since the announcement. We have been waiting for a trade deal and it will be good for hogs and corn. The market also like the fact we have one deal done and now we can move on to Japan, India, the EU and China.
Corn recovered 20 cents in a week while soybeans are up 40 cents in two weeks. Funds have been short covering as both soybeans and corn have been receiving good export demand. China is buying soybeans from Arg/Brazil and they are in turn buying replacement beans from the US! Mexico booked over 650K tonnes of beans from the US this morning, which is about 24mm bushels.
Just when traders were asking “How low can grains go?”, soybeans found some support today due to Argentine demand for US beans. It looks like Argentina will be buying soybeans from the US after making a deal to sell them to China! Wheat is also leading the markets higher due to analysts continuing to reduce the Australian wheat crop production.
The WASDE was bearish for corn and wheat while confirming a massive carryout of soybeans. Corn yields came in at 181.3 and soybeans were 52.8. Global wheat stocks increased as the USDA increased Russian wheat production instead of lowering it.
The markets are quiet as we start September. Corn and Soybean remains range bound while Wheat grinds lower due to lack of bullish news. The WASDE is next week and that has the potential to get the grain and oilseed markets moving again.
Grains are higher as First Notice Day passes for the September contracts. Corn, wheat and soybeans are all higher and we are turning more positive on corn, wheat, hogs, and crude. We are still concerned about soybean prices. Take a listen to the podcast for where we see prices going and why. We also include the charts we will writing about in our newsletters next week.