DID BEANS CONFIRM REVERSAL?

Written By Sebastian Frost

MARKET UPDATE

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Overview

Mixed day as soybeans lead us to the upside flirting with that $13 resistance and target we mentioned yesterday.

Beans saw some strength from the crush report yesterday. We saw a record large crush for September while soy oil stocks came in at their lowest level in 9 years. A pretty bullish report for beans.

Crop consultant Dr. Cordonnier raised his yield estimates for both corn and beans. He raised his corn by 1 bushel to 172.5 which is still 0.5 below the USDA's 173. He raised his bean yield by 0.3 bushels to 49.3 which is compared to the USDA's 49.6. His estimates are still slightly below the USDA's, but not something bulls wanted to see.

Harvest is 62% complete for beans, well above the 52% average. Beans good to excellent rating rose 1% to 52%.

Corn harvest is 45% complete, right around our 45% average. Corn's good to excellent rating remained unchanged at 53%.

As we have mentioned several times the past few weeks, row crops typically start to gain momentum and see less harvest pressure when harvest reaches 50 to 60% complete. Which means we have likely seen the last of harvest pressure from beans and harvest pressure should stop pressuring corn within the next week or two.

We still have conflicts and escalations in the middle east, but the market is ignoring the problems for now. It could definitely lead to a bigger issue down the road but it's anyone's guess.
 

Today's Main Takeaways

Corn

Corn takes another slight loss for the 3rd day in a row. Now a dime off of last week's highs where we failed that $5 resistance twice.

It has been nearly a full month since corn posted it's $4.68 lows. Since then we have chopped sideways and slowly grinded higher as bulls have their eyes set on $5.

Yesterday we saw awful export inspections which has continued to feed the bears argument that demand is still a concern and could ultimately limit our upside.

We still have +2 billion US ending stocks, which yes is a lot. With that big of carry out, the road to the top will very likely be a bumpy one.

As mentioned, corn ratings remained unchanged at 53%. Ohio impressed with 91% rated good to excellent. Taking a look at states to the west, Iowa and Nebraska were both around 50%, while Minnesota was 40%.

Overall, there hasn’t been a ton for bulls to chew on. Hence the choppy action. One thing bulls do have their eyes on is Brazil.

After back to back years of record corn crops, CONAB expects Brazil farmers to harvest a whopping -9.5% less corn this year. CONAB has their 2023 to 2024 corn crop at 119.40 million metric tons. Well below the USDA's current 129 and last year's 137. Still early, but this will be a dominant factor later in the year.

Chart Credit: Kevin Van Trump

Overall, I still believe our lows are in. Does this mean we are going to see a straight shot upwards? No. I expect corn to slowly grind higher like it has done over the past month.

If we can get a close above $5, I think it will lead to the funds hitting the buy button. Keep in mind, they have over 100k short contracts to unwind when they decide to get long.

Another thing to note that I have mentioned over the past several weeks is that corn typically sees harvest pressure until harvest reaches 50 to 60% complete. Currently we are at 45%. So we should see less harvest pressure in a week or two.

Targets are $5, then the 100-day moving average of $5.11, then $5.30, and lastly our 50% retracement of $5.50.

Corn Dec-23
 

Soybeans

Beans lead the way again. Now nearly +50 cents off of last week's lows.

From Brazil Ag Consultant Kory Melby:
"Today was the confirmation of Thursday's reversal."

I do also believe that today's price action was a great indication for a reversal and momentum shift to the upside. We couldn’t close above $13 which is a slight concern. But we closed above the 20-day moving average for the first time since September 11th and potentially broke that downward trend line from late August.

Last week we had the bullish USDA report. Yesterday we got a bullish NOPA crush report. As mentioned, we saw a record large crush for September. While soy oil stocks dropped to 9 year lows.

At the same time, export inspections came in double what the trade was expecting. It just doesn’t feel like demand is going away for beans anytime soon.

We also have the dryness in Brazil supporting beans. As rain in the forecasts continue to die out.

Right now the USDA is forecasting yet another record bean crop for Brazil.

Of course, it is still far too early. But what happens if the US yield isn’t there while at the same time Brazil runs into hiccups? US yield is already sub-50. Some argue it could drop even lower.

Now if South American weather cooperates, yes they very well could produce yet another record crop. But if it doesn’t cooperate, the trade is already expecting a massive crop. If they can’t produce, we will go higher. This is a story that won’t unfold until later in the year.

Short-term and long-term, the bean situation remains pretty friendly. Demand is solid. The technical situation has turned around. Seasonally we rally from here. The long-term upside is there, but will heavily rely on what happens in South America.

Bottom line, I think we still go higher. We finally broke that $12.81 level we had talking about that would lead to higher prices. Today we traded at our highest level all month long. We broke the 20-day moving average for the first time in over a month. We broke that downward trendline we had been battling.

Now I would still like a close above that physiological $13 level to confirm more upside, as a break above should spark some more interest from the funds.

Of course it is never a terrible idea to have some hedges in place especially if you are undersold. Beans have the most upside, but that also means they have the most downside.

If you want to go over a specific plan for you or want specific advise, shoot us a call at (605)295-3100.

Soybeans Nov-23
 

Wheat

The wheat market was the loser today, taking slight losses across the board.

Wheat was mainly lower simply due to a lack of fresh bullish news.

The wheat market is overall a nothing burger. There is not a ton going on.

Global competition continues to to keep a lid on futures. As Russian wheat continues to get cheaper.

We still have global weather issues in Australia, Argentina, and so on that we have had for months but still remain a non factor at the moment.

We now have 2 wars going on. But for the most part, the trade is ignoring the middle east conflicts despite some escalations. Both of these are still potential bullish wild cards. But at the same time I’m not holding my breath hoping one of these sparks a rally.

I did notice Roach Ag had a buy signal for KC wheat still in play for the 17th day in a row.

Last week China bought some wheat. We will have to wait and see if they come back for some more.

Seasonally, we would have already put in the lows. Long term I see higher prices.

Bullish? On Chicago you need a break above $6 for more upside and short covering.

At the same time you have to hold $5.39 if you don’t want to get another leg lower with technical selling.

Chicago Dec-23

KC Dec-23

MPLS Dec-23

Hedging Account

If you are forced to make sales and you need help, make sure to give Jeremey a call to help you come up with a strategy that fits to your situation.

(605) 295-3100

Sebastian Frost
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