Testing Before the Bell Update

CME GLOBEX RECAP:

December corn is up 2 3/4, November soybeans are up 10. December KC wheat is up 5 3/4, Dec Chicago wheat is up 5 3/4, and December MIAX Minneapolis wheat is up .0450.

OUTSIDE MARKETS:

The Dow Jones Industrials Index rose 337 points on Monday and Dow futures are up 221 points early Tuesday. November crude oil is down $1.17 per barrel. The U.S. Dollar Index is down .019 and November gold is down $92.40 an ounce.

CORN:

December corn is again higher, for the fourth time in the last five days, and trading above all key moving averages. Corn continues to reflect optimism following four separate trade deals announced over the weekend and ahead of the upcoming Wednesday meeting between President Trump and China’s Xi. That meeting will hopefully provide some details of a trade agreement. The big questions will, of course, be rare-earth minerals from China and an agreement to purchase U.S. soybeans. Speculation is running rampant with guessing the quantity of soybeans on any deal. Keep in mind that China has loaded the boat on South American soy purchases in advance of what they saw as a long and drawn-out trade conflict. Another situation that could impact any quantity agreement is the fact that China had liquidated hog herds due to poor margins. U.S. corn demand remains a positive with inspections still running 58% over a year ago. There has been no crop progress report since the end of September and no export sales have been reported. However, although China is unlikely to buy U.S. corn, the four trade deals with other Southeast Asian countries are likely to result in more corn and ethanol sales. Without crop progress, a Reuters poll of analysts pegged the corn harvest as 72% done as of Sunday. A storm system Tuesday is working west to east from Oklahoma up to Minnesota and likely to result in some delays. Weather remains very favorable in much of South America with Argentine corn seeding approaching 40% done. The market is higher despite reports of strong cash corn movement on Monday’s rally. December corn is approaching the overbought zone, but a rally and close over the mid-September double top at $4.31 1/4 could lead to more buying interest. DTN’s National Corn Index closed at $3.91 and 38 cents below the December contract.

SOYBEANS:

The soybean and soybean meal rally extended early Tuesday on short-covering and optimism related to the impending U.S.-China trade deal. December soymeal is now higher for the eleventh straight day. Bean oil is under pressure, as palm oil futures fell for a third consecutive day and crude oil is again lower. Trade on Wednesday night and Thursday will likely be volatile during and following the arranged meeting between President Trump and China’s Xi Jinping. Traders are anxiously awaiting any details and approval from the two leaders following a vague trade framework agreed upon over the weekend. With the recent purchases of South American soybeans extending into December, how much of an appetite will China have as Brazilian soy is offered at a sharp discount from late January and February and beyond? While we have seen no crop progress with the government shutdown, the poll from analysts suggest the U.S. soy harvest might be 84% complete with some elevators shutting off further purchases. Soybean inspections might give a hint at demand, with soy inspections so far down 37% from a year ago. Palm oil is down for a third straight day following the weekend trade agreement with Malaysia. Palm oil and palm stearin comprise 79% of Malaysia’s exports to the U.S. and tariffs will be removed. Weather in South America remains a bearish influence with monsoon rains expected to continue to water Brazil while Argentina also enjoys good soil moisture. Both the soybean and soybean meal markets are extremely overbought and due for a correction. DTN’s National Soybean Index closed at $9.98 with a soybean basis of 69 under the November futures.

WHEAT:

All three wheat markets continue to rise on fund short-covering fueled by trade deal talk. While weekend trade deals with Asian countries are thought to be beneficial for U.S. wheat demand, it is unlikely China will be seeking U.S. wheat. Also, Argentine hard wheat FOB offers are said to be some $27/mt (73 cents per bushel) lower than U.S. hard wheat at the Gulf. The Reuters poll of analysts estimate U.S. winter wheat is now 84% planted as of Sunday. Rain is again falling in both Kansas and Oklahoma early Tuesday after the weekend brought more rain. Overhanging the wheat market is the fact that major exporter supplies have been steadily rising and competition is forecast to be stiff. On a lesser note, Kazakhstan wheat production is now expected to be 18 million metric tons and the largest production in 10 years. Both Chicago and Kansas City wheat markets are becoming very overbought. DTN’s National HRW Index closed at $4.45 and 69 under the December futures board.

Dana Mantini can be reached at Dana.Mantini@dtn.com