Dec corn up 1 ¼ at $3.68
Jan beans up 3 ¼ at $9.0825
The DOW is down
USD is weaker
Crude oil up $.37 at $57.38
Corn prices continue to trade in an extremely tight and narrow range. Last week the MAR19 contract traded in a six-cent range the entire week, essentially from a low of $3.80 to an end of week high just above $3.86. We are seeing a similar type of story play out this week, choppy, sideways trade just a touch lower. From a high of just over $3.82 this week down to a low of around $3.76. Bears continue to believe estimates of both corn used for ethanol and exports are going to be reduced by the USDA. They believe these reductions in “demand” will more than offset the lower adjustments to yield that might be made to production to the north. Bulls, on the other hand, are obviously betting on some type of Chinese trade resolution involving U.S. agriculture, improved export and ethanol headlines, and perhaps a weather hiccup or two in South America during the next few weeks.
Soybean traders continue to deal with a neurotic market that has split personalities. One minute a “Phase 1” trade deal is in the bag, the next minute the market is trading rumors and whispers that the deal is off the table. Unfortunately, it feels like bears are winning the game and have become the more domineering personality and face of the market as of late. The JAN20 prices have pulled back more than -50 cents from the mid-October highs as more traders start to really wonder if a trade deal will happen anytime soon? Technically, there’s continued talk bears really want to challenge the psychological support at the $9.00 level. Keep in mind, the JAN20 contract hasn’t closed sub-$8.96 since early-September and hasn’t closed sub-$8.41 in well over a year.
Soybean trade between the United States and China has been disrupted for nearly a year and a half as the trade war rages on, but the extent to which an official pact would benefit the U.S. side largely depends on the details inside. Restoring trade to the previous conditions and allowing China to purchase U.S. soybeans and other agricultural goods when the market is favorable is probably the optimal outcome. But having China commit to a certain volume or dollar amount of products, which has been a major demand of Washington, could be destructive and leave the U.S. soybean market in even worse shape than before. Just prior to the start of the trade war, roughly 60% of annual U.S. soybean exports went to China. When the trade war began last year, China essentially cut off purchases of U.S. soybeans and turned largely to Brazil. U.S. soybean prices crashed in June 2018 and Brazilian prices soared by comparison, and China continued buying from Brazil even when U.S. prices plus the 25% tariff were more economical. But the rest of the world (ROW) was not interested in paying such steep Brazilian premiums, and U.S. business to those countries soared. The United States exported 38 million tonnes to ROW in 2018, topping 1982’s record of 25 million. That was also 90% larger than the previous five-year average.
House Democrats unveiled a long-awaited draft bill to extend a crop of expired tax breaks for renewable energy, including incentives for biodiesel blenders. The biodiesel tax credits would be retroactively extended from 2018 through 2021, and then gradually phased out through 2024. Ten biodiesel plants have been idled this year after the $1-per-gallon biodiesel subsidy lapsed at the start of 2018 along with other tax “extenders.” The legislation hasn’t been scheduled for a markup. But biodiesel industry advocates have said they’re hoping an extension of the tax credit hitches a ride on a final appropriations package by the end of the year. (Source: Politico)