Daily Grain and Livestock Commentary Friday November 02, 2018

Transcription

1 Daily Grain and Livestock Commentary Friday November 02, 2018 DAILY SOY COMPLEX COMMENTARY Enough positive news to spark short-covering bounce into USDA OVERNIGHT CHANGES THROUGH 6:06 AM (CT): SOY BEANS +0.2, BEAN OIL +0.0, SOYMEAL +0.1 OVERNIGHT DEVELOPMENTS: January soybeans are trading 13 1/4 cents higher this morning. Dalian soybean futures were down 3.1% this morning and Malaysia palm oil futures were up 0.42% overnight. There were 602 contracts delivered against the November contract this morning to push month-to-date deliveries to 1,428 contracts. Global equity markets overnight were higher with the key Chinese markets gaining 2.7% and 3.5%. The Asian session was fairly quiet data wise, while the European session featured September German import prices which showed a larger decline than expected. Also out this morning were euro zone PMI manufacturing readings which came in a touch below expectations and moderately below the prior month. Not surprisingly Italian, French and German PMI manufacturing readings were also weaker than the prior month but mostly close to expectations. The North American session will start out with the highlight for global markets, the October US employment situation report. October non-farm payrolls are expected to come in around the 190,000 level, which compares to September's 134,000 reading. October unemployment is forecast to hold steady at a 3.7% rate, while October average hourly earnings are expected to have a moderate increase from September's 2.8% year-over-year rate. The September US international trade balance is expected to show a minimal increase from August's $53.2 billion monthly deficit. September US factory orders are expected to have a moderate decline from August's 2.3% reading. NEAR-TERM MARKET FUNDAMENTALS: A shift to a more optimistic tone over trade negotiations with China along with a weakening US dollar and a shift to supply focus for the USDA reports next week are seen as bullish short-term forces. China meal futures opened down the 5% daily limit after positive US China trade developments. The market closed 3.5% lower. A tweet from President Trump stating that he had a very good conversation with China's President Xi with heavy emphasis on trade gave soy markets reason to run higher yesterday. News that Trump is asking his staff to write up a trade agreement with China helped to support the strong gains this morning in soybeans and the stock market. Soybean oil turned up overnight as well as speakers at a key palm oil conference were seen as supportive. This potential thawing of US-China relations comes when both parties are scheduled to meet in Argentina's G-20 meetings later this month. Early yesterday, the soybean export sales showed 582,230 tonnes of cancellations with 62,755 by China and the balance by "unknown" destinations. Since July 1st, these two destinations have cancelled roughly 2.5 million tonnes for the 2018/19 marketing year. According to Chinese customs data, China imported 132,000 tonnes of soybeans from the U.S. in September compared to 937,000 tonnes last year, an 86% decline. Brazil's October soybean exports came in at were seen at 5.35 million tonnes up 115% from last year's 2.48 million tonnes according to the Trade Minister. Weekly export sales came in at 395,800 tonnes for the current marketing year and 60,000 for the next marketing year for a total of 455,800 tonnes. As of October 25th, cumulative soybean sales stand at 38.3% of the USDA forecast for the season versus a 5 year average of 62.0%. Meal sales came in at 317,400 tonnes for the current marketing year and 4,300 for the next marketing year for a total of 321,700 tonnes. As of October 25, cumulative soybean meal sales stand at 37.3% of the USDA forecast versus a 5 year average of 40.9%. Net oil sales came in at 22,200 tonnes. US soybean crush for September came in at million bushels, slightly below the average estimate of million bushels. This also compares to million bushels in August and is up 16.4% from last year's million. US soybean oil stocks in September came in at billion pounds, well below the average estimate of billion and compared to billion last month and billion last year.

2 TODAY'S MARKET IDEAS: January soybeans soared higher after President Trump's tweet yesterday and extended up through the last nine session range and closed back above the 20 day, 50 day and 100 day moving averages. The market is up 24 1/4 cents on the week so far and looks to put in an outside week higher close. The market also needs a close above the 882 3/4 for an extended bull run. Close in support is seen at 883, with 929 3/4 as next upside target. Palm oil news was supportive overnight and crush data yesterday shows better than expected soybean oil usage. March soybean oil close-in support is at 28.84, with and as next resistance. 1) * Hit stop on long January soybean 850 put for a loss of 7 cents. 2) * Hit stop on long December Soybean 870 put for a 7 cent loss. SOYBEAN COMPLEX TECHNICAL OUTLOOK: SOYBEANS (JAN) 11/02/2018: The market now above the 60-day moving average suggests the longer-term trend has turned up. The crossover up in the daily stochastics is a bullish signal. Daily stochastics are showing positive momentum from oversold levels, which should reinforce a move higher if near term resistance is taken out. The cross over and close above the 18-day moving average indicates the intermediate-term trend has turned up. The market's close above the 2nd swing resistance number is a bullish indication. The near-term upside target is at 917 1/4. The next area of resistance is around 903 1/4 and 917 1/4, while 1st support hits today at 860 3/4 and below there at 832. SOYBEAN OIL (DEC) 11/02/2018: A bullish signal was given with an upside crossover of the daily stochastics. Rising from oversold levels, daily momentum studies would support higher prices, especially on a close above resistance. A negative signal for trend short-term was given on a close under the 9-bar moving average. The market setup is supportive for early gains with the close over the 1st swing resistance. The near-term upside objective is at The next area of resistance is around and 28.83, while 1st support hits today at and below there at SOYMEAL (DEC) 11/02/2018: The cross over and close above the 40-day moving average indicates the longerterm trend has turned up. The daily stochastics have crossed over up which is a bullish indication. The stochastics indicators are rising from oversold levels, which is bullish and should support higher prices. The close above the 9-day moving average is a positive short-term indicator for trend. There could be more upside follow through since the market closed above the 2nd swing resistance. The near-term upside target is at The next area of resistance is around and 323.8, while 1st support hits today at and below there at DAILY CORN COMMENTARY May see lower yield for Nov USDA report; firm OVERNIGHT CHANGES THROUGH 6:06 AM (CT): CORN +0.2 OVERNIGHT DEVELOPMENTS: December corn is trading 2 cents higher this morning. China corn is down 0.7%. Outside market forces are positive with a drop in the US dollar and further strong gains in global stock markets. NEAR-TERM MARKET FUNDAMENTALS: Increasing trade is always seen as a positive force. Positive demand

3 news on ethanol this week and better profitability for meat production ahead are positive but this news was offset by sluggish export news. The surge in soybeans and ideas that next week's USDA Crop Production and Supply/Demand report could carry a positive tilt adds to the positive tone. A tweet from President Trump indicating that discussions were moving along nicely and a meeting at the G-20 in Argentina has been scheduled helped to support the solid gains yesterday. However, the market closed well off the highs. Weekly export sales came in at 394,400 tonnes for the current marketing year and 5,000 for the next marketing year for a total of 399,400 tonnes. There were cancellations of 66,000 tonnes from Vietnam and 62,756 tonnes from South Korea. Sales were well below expectations. As of October 25th, cumulative corn sales stand at 34.7% of the USDA forecast versus a 5 year average of 36.0%. China sold 1.6 million tonnes of corn at auction out of 4.0 million offered yesterday. Since April 12th, China has sold million tonnes of corn out of state reserves. The Buenos Aires Grains Exchange pegged Argentine corn planting progress at 35.5% up just 1.1% from last week's 34.4%. Brazil's September corn exports were seen at 3.20 million tonnes down 36.3% from last year's 5.02 million tonnes. Total corn for alcohol and other uses in September in the US was at 501 million bushels down 7.1% from last month. Corn used for ethanol was seen at 449 million bushels, down 7.1% from last month but up 0.8% from last year's 445 million bushels. August has 22 business days vs 19 in September. The open interest in corn went up 16,211 contracts on Wednesday. Rising open interest is a positive short-term force. TODAY'S MARKET IDEAS: The November USDA report is five trading sessions away and prior to the excitement of the Trump tweet, there was plenty of upside call buying in corn options. Large funds were buying December 375 calls as well as multiples of February 400 calls against January soybean straddles. This clearly points to traders thinking the USDA may reduce the corn yield estimate yet again on November 8th. The market closed mid-range yesterday but did test key resistance at the pivotal 371 3/4 level. A close above 371 3/4 is needed to spark a turnaround with 385 1/4 as next target. Close-in support is seen at 364 3/4 followed by 364 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) 11/02/2018: The cross over and close above the 60-day moving average is an indication the longerterm trend has turned positive. Daily stochastics are trending lower but have declined into oversold territory. A positive signal for trend short-term was given on a close over the 9-bar moving average. There could be more upside follow through since the market closed above the 2nd swing resistance. The next downside objective is 359. The next area of resistance is around 370 3/4 and 374 3/4, while 1st support hits today at 362 3/4 and below there at 359. DAILY WHEAT COMMENTARY Kansas producers struggling to finish plantings OVERNIGHT CHANGES THROUGH 6:06 AM (CT): WHEAT +0.1 OVERNIGHT DEVELOPMENTS: Chicago December wheat is trading 1 1/4 cents higher this morning and Kansas City December is up 2 1/4 cents. Matif

4 December futures are up 0.25%. Outside market forces are slightly positive with a lower US dollar. NEAR-TERM MARKET FUNDAMENTALS: The US dollar is lower again today which is providing some minor support. Yesterday's nearly 1.0% decline in the dollar gave wheat markets a base prior to the run up in the soybean market which lent spillover support to wheat as well. Kansas City hard red wheat gains were tied to slow planting concerns in Kansas with 76% planted as of October 28th compared to the average of 89%. Kansas has had one of the wettest Octobers on record with eastern and central Kansas receiving triple the amount of normal rainfall. The heavy rains have slowed the soybean harvest, at 42% versus 70% average, which in turn is slowing winter wheat plantings on the same ground. Analysts had expected Kansas to seed 10% more wheat this year from last year's 7.7 million acres, but most of those acres are now in question. The Buenos Aires Grains Exchange estimated Argentina's wheat harvest at 4.5% complete compared to 2.8% last week. Wet weather in Argentina slowed progress but the extended forecast is drier. Minor support was also seen from comments by the Egyptian Supply Minister stating that US wheat will probably continue to be offered in upcoming tenders held by Egypt's state run buyer. His hopes are to increase competition and draw lower offer prices. Russia's agriculture agency Rosselkhoznadzor may ask a court to close down 5-6 grain loading ports in the southern region of Rostov. This could slow the pace of wheat exports. Thursday's weekly export sales came in at 582,500 tonnes. This is the third consecutive week that wheat sales were larger than both corn and soybeans. As of October 25, cumulative wheat sales stand at 47.0% of the USDA forecast for the 2018/2019 (current) marketing year versus a 5 year average of 62.3%. Preliminary open interest in Chicago went down 7,995 contracts on Thursday and Kansas City went down 3,073 contracts. TODAY'S MARKET IDEAS: Chicago December wheat is up 3 3/4 cents on the week so far with a close above 513 3/4 needed to spark some short covering. Kansas City December wheat is up 2 cents on the week so far. Today's COT data could show speculative funds have increased their net short position by a sizeable number. The open interest increases over the last ten days has been significant and is likely new trend following shorts. Close-in support for Chicago December wheat is at 503 1/4 followed by 499 3/4. WHEAT TECHNICAL OUTLOOK: WHEAT (DEC) 11/02/2018: Momentum studies are rising from mid-range, which could accelerate a move higher if resistance levels are penetrated. The close above the 9-day moving average is a positive short-term indicator for trend. The market setup is supportive for early gains with the close over the 1st swing resistance. The nearterm upside objective is at 516. The next area of resistance is around 512 3/4 and 516, while 1st support hits today at 503 1/4 and below there at 497 1/4. KC WHEAT (DEC) 11/02/2018: The daily stochastics have crossed over up which is a bullish indication. Daily momentum studies are on the rise from low levels and should accelerate a move higher on a push through the 1st swing resistance. A positive signal for trend short-term was given on a close over the 9-bar moving average. Market positioning is positive with the close over the 1st swing resistance. The next upside objective is 511. Short-term indicators suggest buying dips today. The next area of resistance is around 506 3/4 and 511, while 1st support hits today at 495 3/4 and below there at 488 3/4. MINN WHEAT (DEC) 11/02/2018: Daily stochastics are trending lower but have declined into oversold territory. The market's close below the 9-day moving average is an indication the short-term trend remains negative. There could be more upside follow through since the market closed above the 2nd swing resistance. The next downside objective is now at 566 1/2. The next area of resistance is around 581 and 583 3/4, while 1st support hits today at

5 572 1/2 and below there at 566 1/2. RICE (JAN) 11/02/2018: Daily stochastics are trending lower but have declined into oversold territory. The close below the 9-day moving average is a negative short-term indicator for trend. The close over the pivot swing is a somewhat positive setup. 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 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 11/01/2018 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 / /4 375 CNAH9 Corn / /4 387 SSAF9 Soybeans 831 3/ / / / /4 SSAH9 Soybeans 845 1/ / /2 SMAZ8 Soymeal BOAZ8 Soybean Oil WHAZ8 Wheat / / /4 516 WHAH9 Wheat 512 1/ / / / /2 RCAF9 Rice KWAZ8 KC Wheat 488 1/ / / MWAZ8 MINN Wheat 566 1/ / /4 OTAZ8 Oats 274 3/ / / /4 Calculations based on previous session. Data collected 11/01/2018 Data sources can & do produce bad ticks. Verify before use. DAILY CATTLE COMMENTARY Lower weights, higher beef and solid export outlook; more up Talk that packers are in a position to pay higher for live inventory this week plus a more optimistic view over trade with China was enough to provide solid underlying support yesterday. USDA boxed beef cutout values were up $1.00 at mid-session yesterday and closed $1.62 higher at $ This was up from $ the prior week and the highest beef market since June 19th. The jump in beef prices has boosted packer margins as demand has been much stronger

6 than expected. Commercial traders see packers earning near $200 per head this week as compared with near $50 per head a month ago. Average dressed steer weights for the week ending October 20th came in at 894 pounds, down from 899 the previous week and down 0.56% from a year ago. The 5-year average weekly weight for that week is Weights fell significantly for the second week in a row in a period when weights typically move sideways. This is a positive development. December cattle closed slightly higher on the session yesterday after choppy and two-sided trade early, while April cattle closed moderately higher on the day. Many commodity markets found strength from news of improving trade tone between the US and China on trade negotiations. U.S. beef export sales for the week ending October 25th came in at 25,400 tonnes, compared with the average of the previous four weeks of 14,275. Cumulative sales for 2018 have reached 840,200 tonnes, up 17.0% from last year's pace. The USDA estimated cattle slaughter came in at 120,000 head yesterday. This brings the total for the week so far to 472,000 head, down from 475,000 last week at this time and down from 473,000 a year ago. TODAY'S MARKET IDEAS: The beef rally to the highest level since June should support strong packer demand for live inventory and higher cash cattle trade today. This, along with lower weights and optimism over better trade relations with China should be enough to support the market short-term. April cattle short-term buying support is at the to zone, with as next target. CATTLE COMPLEX TECHNICAL OUTLOOK: LIVE CATTLE (DEC) 11/02/2018: 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. The upside closing price reversal on the daily chart is somewhat bullish. With the close higher than the pivot swing number, the market is in a slightly bullish posture. The next downside target is The next area of resistance is around and , while 1st support hits today at and below there at FEEDER CATTLE (JAN) 11/02/2018: Positive momentum studies in the neutral zone will tend to reinforce higher price action. The market now above the 18-day moving average suggests the intermediate-term trend has turned up. The market has a slightly positive tilt with the close over the swing pivot. The next upside target is The next area of resistance is around and , while 1st support hits today at and below there at DAILY HOGS COMMENTARY Positive news on China/US trade relations to support more up The short-term cash news remains somewhat sloppy but news of possible trade negotiations with China just ahead is seen as a bullish force for the 2019 contracts. The short-term supply is ample but if China tariffs on US pork are lifted eventually, and African Swine fever continues to spread, US exports could be a major force to support pork values in USDA pork cutout values, released after the close yesterday, came in at $74.07, down 44 cents from Wednesday and down from $75.48 the previous week. This is the lowest pork

7 values since September 14th. News that Trump is asking his staff to write up a trade agreement with China helped to support the strong gains this morning in the stock market. December hogs closed lower yesterday but well up from the lows while June hogs closed sharply higher on the day and up 230 points from the lows. December experienced follow-through selling from Wednesday's reversal-type action and traded down as much as 185 points on the day. Weakness in pork product prices helped to pressure. U.S. pork export sales for the week ending October 25th came in at 21,700 tonnes, compared with the average of the previous four weeks of 15,200. Cumulative sales for 2018 have reached 1,087,700 tonnes, up 3.9% from last year's pace. Actual hog slaughter for the week ending October 20th reached million head which is up 5.3% from last year and an all-time record high. Actual US pork production for the week ending October 20 came in at million pounds, up from the previous week and up 5.16% from a year ago. The CME Lean Hog Index as of October 30th was 63.90, down 3 cents from the previous session and down from the previous week. The USDA estimated hog slaughter came in at 475,000 head yesterday. This brings the total for the week so far to million head, down from million last week at this time but up from million a year ago. TODAY'S MARKET IDEAS: A possible break-through in trade relations with China and uncertainty over China pork production into 2019 are bullish longer-term forces and 2019 contracts may continue to gain. June hogs held buying support yesterday at the to zone. Close-in buying support is at 82.15, with as next upside target. 1) Long June Hog call from 180 with an objective of 980. Risk a total of 90 points from entry. 2) Long June/short Feb hogs from June with an objective of June. Risk 1.20 from entry. PORK COMPLEX TECHNICAL OUTLOOK: LEAN HOGS (DEC) 11/02/2018: Momentum studies are trending higher but have entered overbought levels. The market's close above the 9-day moving average suggests the short-term trend remains positive. The market tilt is slightly negative with the close under the pivot. The next upside objective is 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 11/01/2018 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

8 FCF9 Feeder Cattle LHZ8 Lean Hogs Calculations based on previous session. Data collected 11/01/2018 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 The Hightower Report is strictly prohibited.