TFM Midday Update 1-18-2024

CORN

Corn futures are oversold on technical indicators such as stochastics and the RSI, but it should be noted that they can remain this way for quite some time during a strong downtrend.
The short position held by spec traders in corn is near 250,000 contracts, a three-year high level. With momentum headed downwards, funds may continue to pile on short positions.
Currently US corn has an advantage over Argentina in the global market. However, that window is closing, as the US lead is only through February.
China has approved six GMO varieties of corn (and two of soybeans). As they take steps to become more self-sufficient, it may lead to a decline in commodity imports in the coming years.

Soybean meal posted a major reversal downward yesterday. This morning it is mixed with further declines in the front months but has small gains in the deferred. If it is consolidating, it may give soybean futures a breather, but another leg down in meal would be sure to add pressure to beans.
So far today, March soybeans have held support at 12.00, trading down to 12.01 before rebounding slightly. This may be an important area psychologically. However, the May low was near 11.45 and could be tested in the coming weeks if there is no friendly news to push the market higher.
For the spring, Brazil soybean offers are well below that of the US. This is sure to keep pressure on the export market. But if some of the private estimates of a lower Brazilian crop are to be believed, it is possible that this gap could narrow down the road.
Brazil has rain in the forecast over the next 7-10 days in the northern and central growing areas. For that same timeframe, Argentina has little moisture in the forecast.

After the recent storms in the US, much of the winter wheat crop has snow cover to protect from cold temperatures. But perhaps more importantly, soil moisture levels are much better than last year. Therefore, the crop has entered dormancy with better conditions.
Egypt’s wheat tender resulted in the purchase 360,000 mt. Five cargoes were sourced from Russia, with an additional cargo from France. Nevertheless, Paris milling wheat futures are trading just above the contract lows.
By this weekend, another round of cold temperatures are expected to affect much of the Midwest and plains states. The front moving down from the arctic will bring sub zero temps to many areas.
The US Dollar Index continues to be in an uptrend, since making a near-term low on December 28. If it continues to rise, it will also continue to add pressure to the export market, and thus futures prices.

Brandon Doherty