DAILY SOY COMPLEX COMMENTARY 10/31/18

Transcription

1 Wednesday October 31, S. Wacker Dr., Suite 2350 Chicago, IL or DAILY SOY COMPLEX COMMENTARY Market lacks reasons for speculative buyers to get active OVERNIGHT CHANGES THROUGH 6:06 AM (CT): SOY BEANS +0.0, BEAN OIL +0.0, SOYMEAL +0.0 OVERNIGHT DEVELOPMENTS: January soybeans are trading 1/2 of a cent higher this morning. Dalian soybean futures were up 0.6% this morning and Malaysia palm oil futures were down 0.88% overnight. There were only 13 contracts delivered against the November contract. Global equity markets overnight were positive across-the-board despite disappointing economic readings from Asia. Asian economic news overnight included Japanese industrial production which declined at a faster than expected pace for the month of September. Japan also released housing starts which declined by 1.5% on a year-over-year basis, construction orders which gained slightly and consumer confidence that dipped from the prior month. The Bank of Japan overnight held monetary policy unchanged, reduced its inflation forecast and generally left the market with the impression that the bank would wait to remove stimulus. From China the market saw factory growth fall to the slowest growth rate in two years and that negative economic result was magnified by a decline in exports to 46.9 from in the prior month. Chinese official factory PMI came in under the expectations and under the prior month. Chinese October services PMI also came in below the September readings. The European session started out with UK consumer sentiment readings from a private research firm that declined to a three month low and that was a reading that economists suggest is the result of unending exit turmoil. Also from Europe were German retail sales which barely remained in positive territory and were markedly under expectations. Other data from Europe included French CPI which was generally soft and therefore indicative of slow traction in the French economy. Also released early this morning were Italian unemployment rate figures which jumped into double digits at 10.1%. The North American session will start out with a weekly private survey of mortgage applications, followed by the October ADP employment survey which is expected to have a moderate decline from September's 230,000 reading. The October Chicago PMI is expected to have a modest decline from September's 60.4 reading. NEAR-TERM MARKET FUNDAMENTALS: While a bit oversold basis traditional technical indicators, there is still no sign of a short-term low. China sold 84,620 tonnes of soybeans from state reserves. January soybeans extended down to the lowest settlement since September 19th yesterday as the market lacks good reasons for buyers to get active. The market has also closed lower in seven out of the last nine sessions. A weaker Dalian market pressured the soy complex early yesterday with Dalian soybeans trading to the lowest level since July and down 4.6% on the month so far. A weaker trend continues to be seen from the weekend news that the state-run China Feed Grain Industry Association would start to implement an amended animal feed formula, dropping meal usage by 1.5% for hogs and 1.0% for poultry. The new minimum protein requirement should cast a cloud over the outlook for long-term soybean meal usage. A quick calculation puts the net impact of reducing soybean usage by 14.0 million tonnes and meal usage by 11.0 million tonnes. Wet weather is forecast for the Delta and southeastern belt over the next seven days which may slow the tail end of harvesting. Newly elected Brazilian President has recently had some unfavorable comments on China and Chinese investment in Brazil. His "China is not buying in Brazil, they are buying Brazil" was a favorite comment during the campaign. However, most feel he will resort to pragmatism and seek economic cooperation with China. Still, there is speculation that once Bolsonaro takes office, bilateral relations will cool due to the close relationship he has

2 with President Trump. Brazil has benefited from the US-China trade war, with China turning to Brazil for soybean imports. In the first eight months of the year, Brazil's soybean exports rose by 20% from last year and have reached $25.7 billion. January soybeans are down just 12 1/2 cents on the month so far and January soybean meal is down $2.30 on the month. The soybean market is still digesting Monday's bearish outside day lower close and failure at the 50 day moving average. January soybeans have closed lower in eight of the last eleven sessions since the October 16th high. Aggressive traders could still look to buy the January 850 put and sell the March corn 370 put at a net cost of 8 3/4 cents to the soybean put. January soybean resistance is at 857 3/4, with 839 1/2 the next downside target. The swing low objective remains at 795 1/2. 1) Long January soybean 850 put from 13 7/8th with an objective of 39. Risk 7 cents from entry. 2) Long December Soybean 870 put from 17 cents with an objective of 39. Risk 7 cents from entry. SOYBEAN COMPLEX TECHNICAL OUTLOOK: SOYBEANS (JAN) 10/31/2018: Daily stochastics are trending lower but have declined into oversold territory. A negative signal for trend short-term was given on a close under the 9-bar moving average. It is a slightly negative indicator that the close was under the swing pivot. The next downside target is now at 839 1/2. The next area of resistance is around 851 1/2 and 857 3/4, while 1st support hits today at 842 1/2 and below there at 839 1/2. SOYBEAN OIL (DEC) 10/31/2018: Daily stochastics declining into oversold territory suggest the selling may be drying up soon. The market's short-term trend is negative as the close remains below the 9-day moving average. The upside daily closing price reversal gives the market a bullish tilt. It is a slightly negative indicator that the close was lower than the pivot swing number. The next downside target is now at The market is approaching oversold levels on an RSI reading under 30. The next area of resistance is around and 28.23, while 1st support hits today at and below there at SOYMEAL (DEC) 10/31/2018: Daily stochastics are trending lower but have declined into oversold territory. The market's short-term trend is negative as the close remains below the 9-day moving average. The outside day down and close below the previous day's low is a negative signal. The swing indicator gave a moderately negative reading with the close below the 1st support number. The next downside objective is The next area of resistance is around and 312.5, while 1st support hits today at and below there at DAILY CORN COMMENTARY Short-term news remains somewhat negative; yield expectations? OVERNIGHT CHANGES THROUGH 6:06 AM (CT): CORN -0.1 OVERNIGHT DEVELOPMENTS: December corn is trading 1/2 of a cent lower this morning. China corn is down 1%. Outside market forces are slightly positive. NEAR-TERM MARKET FUNDAMENTALS: With hefty beginning stocks, a record crop and some slower export

3 news recently, the market is seeing some pressures. Ukraine corn is as cheap to US corn as it has been since early Ukraine exports are expected to be up 35% from last year. December corn is approaching the 50 day moving average at 363 1/2. Weak crude oil and a higher US dollar pressured prices yesterday as well as harvest pressure. There was heavy buying seen in the March 380 corn calls on Tuesday from speculative fund managers. These calls settled at 11 1/2 cents and have a.49 delta. A recent tweet about Chinese corn ending stocks may be the culprit of fresh buying interest. The USDA estimated China's corn supply at 186 days three years ago and now it is estimated at 86 days. World corn supply was estimated at 80 days two years ago and is now estimated at 52 days. If you exclude China and the US, the world corn supply would be just 38 days. If you recall, the Chinese are in the process of expanding industrial use and have auctioned off roughly 94.0 million tonnes of old corn stocks since April 12th. World corn ending stocks are estimated at million tonnes and minus China's stocks are at just million tonnes. Monday's crop progress report had corn harvested as of October 28th at 63% versus 49% last week and 52% last year. The latest GFS model has moderate rains falling in the Southeast and up into the eastern corn-belt into the weekend. The longer term 8-14 day outlook has two systems skirting across the Eastern belt as well favoring Illinois, Indiana and Ohio. Some minor delays into early November are possible. Weak soybean and wheat markets continue to pull the corn market down which might be an ongoing feature considering the soybean price outlook. With harvest nearing completion and the November USDA report just seven sessions away, some speculative bottom picking seems likely. Several analysts have touted a corn yield under bushels per acre, calling out the USDA's ear weights and population estimates. We should be seeing average estimates soon which could lead to more two-sided action. A close above 371 3/4 would be needed to open up the market for a run up to 378 1/2 and possibly 385 1/4 for December corn. Close-in support is seen at 363 followed by 361 3/4. Short 1 July Corn 3.90 call and 1 July Corn 370 put and also long 6 July corn 450 calls at a net cost of six cents on the entire spread. Use an objective of +68 cents on the spread. Risk a total of 12 cents from entry. CORN TECHNICAL OUTLOOK: CORN (DEC) 10/31/2018: The close below the 60-day moving average is an indication the longer-term trend has turned down. Momentum studies trending lower at mid-range should accelerate a move lower if support levels are taken out. The market's close below the 9-day moving average is an indication the short-term trend remains negative. It is a slightly negative indicator that the close was under the swing pivot. The next downside target is now at 361 3/4. The next area of resistance is around 366 1/2 and 369, while 1st support hits today at 363 and below there at 361 3/4. DAILY WHEAT COMMENTARY Uptrending OI suggests speculative shorts are building OVERNIGHT CHANGES THROUGH 6:06 AM (CT): WHEAT OVERNIGHT DEVELOPMENTS: Chicago December wheat is trading 3 1/2 cents lower this morning and Kansas City December is down 3 cents. Matif December futures are down 0.38%. Outside market forces are slightly positive.

4 NEAR-TERM MARKET FUNDAMENTALS: Fund and speculative selling remains active and one look at open interest would suggest that traders are building a larger net short position on the break. Open interest is at the highest level since June. The wheat markets gave back nearly half of last Friday's gains yesterday with a strong US dollar continuing to pressure the market. The silver lining in the dark cloud that is the wheat market was the firming of calendar spreads on the selloff with Chicago December/March gaining 1 1/4 cents to -17 1/2 cents and Kansas City December-March up 1/2 cent at -25 3/4. This could be an indication that US wheat is becoming competitive with world values. Russian wheat prices fell to $224 per tonne last week according to Moscow based IKAR. This compares to $230 per tonne the previous week. The market continues to be supported from last Friday's Egyptian wheat tender that included one cargo of US wheat and US wheat at the Gulf is still competitive to Black Sea region offers through the December-January-February timeframe. Egypt's wheat purchases for the year are on pace with last year after last week's 470,000 tonne purchase. Egypt has bought 3.81 million tonnes for the season so far with Russian wheat accounting for million tonnes (or 76%). The Egyptian supply minister commented that Egypt has 3.7 million tonnes of wheat stockpiles which should be sufficient for 4 1/2 months. Winter Wheat planting progress as of October 28 was at 78% versus 72% last week and compared to 83% last year. Traders were looking for winter wheat plantings to come in at 82%. The initial crop condition report showed 53% good/excellent (G/EX) compared to 52% last year. This is down from analyst's expectations of 60% rated G/EX with Kansas rated 42% good/excellent. Chicago December wheat is down 9 1/4 cents on the month so far with Kansas City December down 16 1/2 cents on the month. The strength in the US dollar, trading up to the highest level since June 2017 yesterday, continues to pressure the wheat markets. Close-in support for Chicago December wheat is at 494 1/2 followed by 490 1/2 with 513 3/4 as resistance. A close under 496 3/4 today would leave a swing count down at 474 1/2. A close under 494 3/4 today for December KC wheat would leave a swing count down at 474 3/4. WHEAT TECHNICAL OUTLOOK: WHEAT (DEC) 10/31/2018: Momentum studies are trending higher from mid-range, which should support a move higher if resistance levels are penetrated. The market's short-term trend is negative as the close remains below the 9-day moving average. The market's close below the 1st swing support number suggests a moderately negative setup for today. The next upside objective is 511 1/2. The next area of resistance is around 505 and 511 1/2, while 1st support hits today at 494 1/2 and below there at 490 1/2. KC WHEAT (DEC) 10/31/2018: The daily stochastics gave a bearish indicator with a crossover down. Momentum studies are still bearish but are now at oversold levels and will tend to support reversal action if it occurs. A negative signal for trend short-term was given on a close under the 9-bar moving average. The market's close below the 1st swing support number suggests a moderately negative setup for today. The next downside objective is now at 486. The next area of resistance is around 499 1/2 and 505 1/4, while 1st support hits today at 490 and below there at 486. MINN WHEAT (DEC) 10/31/2018: Momentum studies are declining, but have fallen to oversold levels. The market's close below the 9-day moving average is an indication the short-term trend remains negative. The market's close below the pivot swing number is a mildly negative setup. The next downside target is now at 566. The next area of resistance is around 575 and 580 1/4, while 1st support hits today at 568 and below there at 566.

5 RICE (JAN) 10/31/2018: The moving average crossover down (9 below 18) indicates a possible developing shortterm downtrend. Stochastics trending lower at midrange will tend to reinforce a move lower especially if support levels are taken out. The market's close below the 9-day moving average is an indication the short-term trend remains negative. It is a slightly negative indicator that the close was under the swing pivot. The next downside objective is Some caution in pressing the downside is warranted with the RSI under 30. The next area of resistance is around and , while 1st support hits today at and below there at DAILY TECHNICAL STATISTICS 9 DAY RSI RSI SLOW STOCH D SLOW STOCH K 4 DAY 9 DAY 18 DAY 45 DAY 60 DAY CLOSE GRAIN COMPLEX CNAZ / CNAH / SSAF SSAH / SMAZ BOAZ WHAZ / WHAH / RCAF KWAZ / MWAZ / OTAZ / Calculations based on previous session. Data collected 10/30/2018 Data sources can & do produce bad ticks. Verify before use. DAILY SWING STATISTICS Contract Support 2 Support 1 Pivot Resist 1 Resist 2 GRAIN COMPLEX CNAZ8 Corn 361 3/ / / /4 CNAH9 Corn 374 1/ / /2 SSAF9 Soybeans 839 1/ / / /2 858 SSAH9 Soybeans 852 3/ / / / /4 SMAZ8 Soymeal BOAZ8 Soybean Oil WHAZ8 Wheat 490 1/ / /2 WHAH9 Wheat 507 1/ / / / /4 RCAF9 Rice KWAZ8 KC Wheat 485 3/ / / /4 MWAZ8 MINN Wheat 565 3/ /4 OTAZ8 Oats 271 1/ / / / /2 Calculations based on previous session. Data collected 10/30/2018 Data sources can & do produce bad ticks. Verify before use. DAILY CATTLE COMMENTARY Surge in consumer confidence in line with strong beef prices The technical action is weak and the market is trying to absorb a hefty shortterm supply and the outlook for higher production ahead. Beef production is running well above last year and well above 2016 levels but beef prices are also well above the levels seen in the last two years. Talk of sluggish meat export demand plus hefty supply of all meat plus the premium to the cash market were

6 all seen as factors to help pressure. With high cold storage supply and record meat production, meat exports are very important, or the market may have a difficult time absorbing the extra meat. The showlist is higher this week after tighter availability for many weeks in a row and this brought about talk that the cash market trend may NOT stay up. However, USDA boxed beef cutout values were up $2.19 at mid-session yesterday and closed $1.52 higher at $ This was up from $ the prior week and the highest beef market since June 27th. This shows extraordinary demand. Consumer confidence readings for October hit the highest level in 18 years. This is a positive factor for consumer demand for beef. December cattle opened higher yesterday but could not hold the gains and closed lower on the day. The selling pushed the market down to the lowest level since October 18th. Ideas that the market may not need a big premium to the cash market in a period of rising beef production and slower exports may have helped to pressure the market. The USDA estimated cattle slaughter came in at 117,000 head yesterday. This brings the total for the week so far to 234,000 head, down from 237,000 last week at this time and down from 235,000 a year ago. The impressive run higher in beef prices could help to hold packer demand high and may support the cash market short-term. With beef prices at the highest since June 27th, it is difficult to get too negative on the cash trend. Bulls might concentrate on April cattle and bears follow December. April cattle support is at the to level, with as next upside target. December cattle resistance is at and , with support at and Look for April to take a premium of 752 points to the December. CATTLE COMPLEX TECHNICAL OUTLOOK: LIVE CATTLE (DEC) 10/31/2018: The close under the 40-day moving average indicates the longer-term trend could be turning down. The daily stochastics have crossed over down which is a bearish indication. Momentum studies trending lower at mid-range could accelerate a price break if support levels are broken. The close below the 9-day moving average is a negative short-term indicator for trend. It is a slightly negative indicator that the close was lower than the pivot swing number. The next downside objective is The next area of resistance is around and , while 1st support hits today at and below there at FEEDER CATTLE (JAN) 10/31/2018: The daily stochastics gave a bearish indicator with a crossover down. Momentum studies are declining, but have fallen to oversold levels. The market's close below the 9-day moving average is an indication the short-term trend remains negative. The market is in a bearish position with the close below the 2nd swing support number. The next downside objective is now at The next area of resistance is around and , while 1st support hits today at and below there at DAILY HOGS COMMENTARY Short-term China pork tariffs an issue; long term up The rally of the past week has narrowed the basis and leaves the futures discount to the cash at a more normal level. There is a major clash of the fundamentals for 2018 to China is likely to be a major buyer of pork on the world market next year which is likely to lift global prices due to the rapid spread of African swine fever. However, the short-term export demand is weak; especially to China, cold storage stocks are high and production is still at a

7 record high. December hogs found support recently due to the lower than expected slaughter pace. Slaughter since October 1st is showing an increase of 1.63% as compared with trade expectations for a gain of 3-4%. Traders will monitor weekly weights this week which might show an increase. December hogs traded sharply higher on the session early yesterday and challenged the October 1st highs before closing just slightly higher on the day and nearly 100 points off of the highs. February closed slightly higher and up for the seventh day in a row. The CME Lean Hog Index as of October 26th was 64.16, down 45 cents from the previous session and down from the previous week. The USDA estimated hog slaughter came in at 465,000 head yesterday. This brings the total for the week so far to 931,000 head, down from 952,000 last week at this time but up from 907,000 a year ago. USDA pork cutout values, released after the close yesterday, came in at $76.12, up 47 cents from Monday and up from $76.00 the previous week. For African swine fever, there are no vaccines, no cure, and infected hogs typically die within ten days of contracting it. Backyard farms account for 47% of China's output. A minor drop in production in China could result in massive imports on world market. If China were to lose 16% of their herd, it would be equivalent to all of the global trade in pork for December hog close-in resistance is at 59.52, with support at April hog support is at 70.25, with as next target. * Buy June Hog call at 180 with an objective of 980. Risk a total of 90 points from entry. Long June/short Feb hogs from June with an objective of June. Risk 1.20 from entry. PORK COMPLEX TECHNICAL OUTLOOK: LEAN HOGS (DEC) 10/31/2018: Studies are showing positive momentum but are now in overbought territory, so some caution is warranted. The market's short-term trend is positive on the close above the 9-day moving average. With the close higher than the pivot swing number, the market is in a slightly bullish posture. The nearterm upside objective is at The next area of resistance is around and , while 1st support hits today at and below there at DAILY TECHNICAL STATISTICS 9 DAY RSI RSI SLOW STOCH D SLOW STOCH K 4 DAY 9 DAY 18 DAY 45 DAY 60 DAY CLOSE MEAT COMPLEX LCZ FCF LHZ Calculations based on previous session. Data collected 10/30/2018 Data sources can & do produce bad ticks. Verify before use. DAILY SWING STATISTICS Contract Support 2 Support 1 Pivot Resist 1 Resist 2 MEAT COMPLEX LCZ8 Live Cattle FCF9 Feeder Cattle LHZ8 Lean Hogs

8 Calculations based on previous session. Data collected 10/30/2018 Data sources can & do produce bad ticks. Verify before use. ***This report includes information from sources believed to be reliable and accurate as of the date of this publication, but no independent verification has been made and we do not guarantee its accuracy or completeness. Opinions expressed are subject to change without notice. Any information or recommendation contained herein: (i) is not based on, or tailored to, the commodity interest or cash market positions or other circumstances or characterizations of particular investors or traders; (ii) is not customized or personalized for any such investor or trader; and (iii) does not take into consideration, among other things, risk tolerance, net worth, or available risk capital. Any use or reliance upon the information or recommendations is at the sole discretion and election of the subscriber. The risk of loss in trading futures contracts or commodity options can be substantial, and traders should carefully consider the inherent risks of such trading in light of their financial condition. Any reproduction or retransmission of this report without the express written consent of Zaner Group, LLC. is strictly prohibited.