Soybeans

The November supply and demand report didn’t provide the bullish spark that the bull camp needed. Corn yield was cut more than expected to 167 bushels per acre, but since harvested acreage was left alone, production, and then ending stocks, ended up higher than expected. The corn market still managed a positive close for the day, but after the five consecutive lower closes the December corn had made, the 2-cent bounce didn’t really amount to much.

The recent slide has the December corn trading under the 50-day moving average, and the next downside target is likely the September low of $3.52 ¼. If that low fails to hold, this market will get really ugly. Low prices do cure low prices, so maybe that is what we need in order to spur some export demand.

Since the December supply and demand report usually doesn’t amount to much, it looks like the bulls will have to wait until the January supply and demand report for the next shot at some friendly news. Perhaps then we will see another cut in the yield estimate and a cut in harvested acreage as well.

Wheat ending stocks were cut by 29 million bushels, which is meaningless in the grand scheme of things. Ending stocks are still over 1 billion, which means we still don’t need to produce much wheat in the coming year. Acreage is going to keep declining until there is a better economic incentive to produce wheat. With world stocks as high as they are, it is hard to grow export demand, and with domestic demand stagnant, there aren’t many solutions to the problem. The best hope for the wheat is still global production issues for both wheat and feed grains that keep our surpluses from building.

That being said, wheat charts still look better than corn charts. We have enough export demand to keep a bid under the market, but if the corn makes a run at the September low, it will likely pull the wheat market with it.           

The soybeans numbers were negative all around. We were supposed to get a yield cut, an acreage cut and an ending stocks cut, but we didn’t get any of that. Yield and acreage were steady with last month and ending stocks were higher because of lower crush. Even though we have seen some good export numbers, the U.S. Department of Agriculture left the export estimate alone. They must not have much confidence in us reaching a trade deal with the Chinese.

Soybean futures are stuck in a holding pattern. The trading range is fairly large, but the January contract hasn’t gone anywhere for two weeks. We will get a break out eventually, but judging by the collective grain market action on Friday, it looks like a breakout will be to the down side. As long as January beans hold above $9.23, the $9.80 area is a viable upside target. Failure at $9.23 would suggest a move back to $9.

Cattle had another good week. Cash cattle trade in Kanas was at the $114 to $115 level and it was at least $116 in Nebraska, so our post-fire rally continues.

Live cattle futures posted numerous multi-month highs, which was fueled by the rising beef price and rising cash market. Multi-year highs in the beef market can result in multi-year highs in the cattle as well. It doesn’t hurt that rumors abound that Tyson will start doing test runs in Finney County next week. If shuttering the plant caused a drop in live cattle price and a rise in beef, then reopening the plant should have the opposite impact.

Feeder cattle have lagged the live cattle in relative terms. January feeders didn’t even take out last week’s high, though several other contracts did. New highs again in the deferred live cattle, should spur some interest in the feeders and allow the January contract to move above $150.

Schwieterman, Inc. is a full service commodity brokerage firm. If you would like more information on commodity markets or our brokerage services, contact Eric Relph at 800-272-9131 or www.upthelimit.com.

Note: This material has been prepared by a sales or trading employee or agent of Schwieterman, Inc. and is, or is in the nature of, a solicitation. This material is not a research report prepared by Schwieterman, Inc. Research Department. 

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