Soybeans Led Overnight Gains on Optimistic Comments From Trump

GENERAL COMMENTS:

President Trump suggested Sunday that he would consider lowering tariffs on China as part of upcoming negotiations — a key concession that is required to make the purchase of U.S. soybeans by China affordable. He also has been walking back threats of an additional 100% tariffs to take effect Nov. 1 as a retaliation to China’s increased control over rare earth material exports. Although the inevitable rollercoaster of news will have many highs and lows yet, that is the first time he has suggested cutting fentanyl tariffs, so the market has responded positively. Even corn has been able to trade higher overnight despite Trump’s attacks on Colombia on social media, a top five purchaser of U.S. corn. On the data front, the government shutdown will limit news to just the export inspections report due out at 10 a.m. CDT. With basis levels and intermonth spreads continuing to suggest either exceptional export demand and/or disappointing yields, the report will be watched closely for clues. In the meantime, a warm and wet end to October for many will likely slow remaining harvest progress, especially in the western Corn Belt. In outside markets, the lack of data has left most drifting, but gold’s dramatic key reversal Friday still gathers attention. It ended up with almost a $200/ounce range on the day in the process. Even though it’s more than $60/ounce higher in early trade, such a technical formation often marks a top — whether it results in a short-term one or long-term top is unclear.

OUTSIDE MARKETS:

Treasury markets are mixed with the bias remaining to the upside on expectations for further rate cuts amid pressure on the economy from the government’s shutdown. The market is not only pricing in two quarter-point rate cuts this year but is also pricing in a third for the January meeting. The U.S. 10-year note is 4.01%.

The U.S. dollar is quietly higher following Friday’s impressive rally off the 100-day moving average (which coincided with the 25-day moving average). That signals another test of July highs (100.055) could be expected with a close over leaving the double-bottom target of 104 in traders’ sights. The December U.S. dollar is .143 higher at 98.335.

Equity markets are quietly higher on declining interest rate expectations.

Energy markets are mixed with crude oil remaining under pressure while diesel futures extend Friday’s dramatic reversal higher. November crude oil is $.45 per barrel lower at $57.09.

The Dec Canadian dollar is down .00085 at $.71455. The Brazilian real is down .00025 at .18410. December gold is up $62.20 per ounce at $4275.50.

OILSEEDS: 

Canola is quietly higher with gains in soybeans helping psychologically despite minor losses in soybean oil. The lack of progress out of Ottawa on taking China up on their offer to remove tariffs so trade can return to normal remains a wet blanket on the market. Technically speaking, the divergence bottom formation remains intact with a solid close over the 25-day moving average for the January contract confirming it should hold. The bounce seen in October has finally broken prices out of a down-channel that’s been dominating the market since the June top. Both suggest the path of least resistance should be higher with a return to the 100-day moving average near $680/mt a reasonable goal. January canola is $1.00 higher at $631.30/mt.

Palm oil is closed for a holiday. December palm oil was .02% lower Friday.

Soybean oil is barely lower on spreading against soybean meal with the latter being quite strong. The reversal higher in diesel futures Friday should provide underlying support amid the lack of meaningful data.

European rapeseed is trading well within its recent range. February rapeseed is 2.00 euros higher at 465.00 euros per mt.

Soybeans are strong to start (as outlined in the general comments) with positive cash market signals remaining. Soybeans on the Dalian exchange (China) closed higher following a volatile session with prices hitting one-month highs. That would also suggest China may be equally eager to arrive at a deal with Trump considering their reluctance to buy soybeans from Brazil for Dec/Jan shipment due to a significant premium over U.S. soybeans. Technically speaking, support at $10/bushel has held so far and appears to be attracting buying interest. The January contract has taken over as the lead contract with it currently trading above previous October highs. There is a very interesting saucer bottom remaining with a close over $10.87/bushel key to an acceleration higher. The overnight rally also puts the market above the 100-day moving average with it adding to the positive outlook should gains be held into the close.

WHEAT:

Wheat markets are quietly lower after a mild recovery from contract lows set early last week. Short covering by managed-money traders is likely the best hope for any meaningful rally but tracking data won’t be available until after the shutdown ends.

CORN:

Corn is barely higher with President Trump’s social media post against Colombia surely weighing with positive cash market signals offsetting. A wet end to the month for the western Corn Belt may lead to harvest delays and improve the cash picture further. Technically speaking, even though the head and shoulders bottom formation took a hit with the recent selloff, there was strong buying interest at $4.10/bushel. With a close over both the 100-day and 25 day moving averages to end last week, a rally over the important resistance level of $4.30/bushel would be the next goal for the bulls. It not only would fill the gap down that remains from July 7 but have an eventual target of $4.68/bushel.

Mitch Miller can be reached at mitchmiller.dtn@gmail.com

Follow him on social platform X @mgreymiller