Corn and soybeans both broke through support today. The demand bears have been in full control of the market while the supply bulls are in retreat. In this podcast we go over the bull and the bear cases. What each of them thinks and why. Below are the Supply and Demand tables I talk about on the podcast. I’ll add some color to the tables below but take a listen to Turner’s Take Podcast for a full explanation.
Grain Trading Podcast
In the podcast I go over what the supply bulls and demand bears are fighting about. On the supply side the US could be at a 12.25 billion production level for corn and 3.5 billion for soybeans. If corn production is 12.25 billion (78mm acres harvests X 160 yield) then demand needs to be rationed 400 to 500mm to make sure ending stocks are around 1 billion. The supply bulls argue corn needs to go higher for price rationing.
The CBOT remains range bound as traders debate supply (acres and yield) and demand (exports and feed). The market will have little guidance from the USDA until the August 12th WASDE report. Weather forecasts have temps getting cooler with more precipitations. The US will have a smaller corn and soybean crop this year, but the trade is still debating how small and how much price rationing is needed. In this episode we also dive into what this all means for the 2020-21 corn and soybean crops too. Make sure you take a listen to this week’s Turner’s Take Podcast!
Today is the last trading day of the year and it should be relatively quiet. President Trump over the weekend tweeted that the US and China are making “big progress” on trade talks. China says they are willing to meet the US “half way” on the Intellectual Property disputes. We are also waiting on China to buy more ag products from the US. The market expects another 2mm mt of soybean purchases.
The holiday markets have been all over the place during the past few trading sessions. Today we are getting a relief rally and it remains to be seen if this is a true reversal. The problem is the low volume. One can make the argument we probably went down to much during low volume last week and Christmas Eve and now we are coming up too fast on low volume today. That is how it is around the holidays if the market is volatile.
The FOMC announced rate hikes of 0.25% yesterday, bringing the overnight Fed rate to 2.25% to 2.50%. The market took this as bearish as they hoped the Fed we ease off interest rate hikes in the face of the stock market correction. Lost in the bearish mood is the fact the Fed only sees 2 rate increases in 2019, which is less than the 3 to 4 that had been expected.
China bought 1mm mt of soybeans this morning and the market is expecting at least another 1mm mt before the weekend. 2mm mt is just under 80mm bushels. Assuming this is all in old crop sales, carryout goes from 950 to 870.
The US and China reached a trade truce over the weekend at the G20 meeting. For now the market is cautiously optimistic about the deal. Shorts covered today but we did not see new buying. For the markets to rally further we need to see real export demand come to the US from China
The G20 meeting is Friday and Saturday in Argentina. The G20 is a group of leading economic nations who get together to address pressing economic issues. During this meeting nations will get together who need to address specific issues just between them. There are two of these discussions that are of particular note to our markets.
Happy Thanksgiving! In this week’s podcast we go over the big movement in Natural Gas. Then, I talk about some of the special podcasts I plan to do, like trading in limit markets, in-depth looks at the spread markets, and many more. So be on the lookout for those! Finally, we finish up with the grain and livestock markets.