USDA Report Sparks a Rebound as Grain Markets Look Ahead

An unproductive meeting between Russia and Ukraine ended today with no resolution toward the war which helped both wheat and corn post solid afternoon bounces as the early week bearish concern about the humanitarian export corridor proved misguided, again. Beans consolidated after Tuesday’s big report driven rally but did close strong for modest gains. Other news was limited with no daily export sales announcements and no additional comments from with the US or Chinese trade teams about work toward the 30 x 30 trade deal. Thursday’s weekly export report is not expected to be overly bullish and with no world weather concern and no USDA yield updates for two-months, the markets will be looking for news that may be hard to find unless it involves a breakthrough in either war or trade with China. Energy prices have bounced quickly from the early week lows to strengthen blending and crush margins, keeping US bio-fuel use on a record pace.

News and Notes:

• Both Brazil and Argentina weather forecasts are wet for the next week with no threatening longer-term outlook. Super EL Nino is not causing any problems. US weather is not market moving as harvest winds down.
• The daily December corn chart is on Page 2 and shows today’s consolidation after the bullish from sparked by the bullish USDA report. To this point, the 2 ½ month price collapse held the contract low of $4.25 ¾, but technical traders like to take advantage of slow market conditions when they are close to important numbers, to push the price to them to test how much buying there is around the price. Neither Tuesdays nor today’s trade did not seriously test the 20-DMA (red line), but with the still deeply oversold RSI and the funds holding a flat position, I will be surprised if it is not tested soon. The bulls need a reason to come back in as big buyers and the current technical landscape sets up a good base if some additional bullish news can be found.
• It has been easy to bash the USDA this year, but in response to public outcry about their outdated and opaque information gathering, Anthony Prillaman (Associate Deputy Director of the USDA’s Office of Analysis and Estimation) released an in-depth presentation explaining the yield gathering and estimation process for Tuesday’s November yield update. There is a lot of information on the 26-slides, but it is a welcome opportunity to see behind the curtain. Please take a few minutes to look through the data. There is even contact information at the end of the report to call if you have any questions.
• After two days of Russia/Ukraine peace talks, the meetings ended earlier today with no plan for a temporary ceasefire or any progress toward re-opening the Black Sea export corridor. Russia does not want it because they know Ukraine will smuggle in more weapons and Ukraine will not give Russia any territory, which will continue the impasse. A hostage/prisoner swap was completed. Chinese, US, and Russian leaders will all attend the upcoming APEC meeting where side conversations about the war are expected to occur.

Happy Veterans Day and thanks to all of you who served and the families who supported our brave men and women in uniform. The USDA gave the markets a welcome jolt of bullish news, but the 2 month wait until the final January report will not help the bulls regain much momentum without a string of bullish developments. The demand side has to come from China and the potential 30 x 30 trade deal and lame duck efforts by Congress to get a new Farm Bill finally passed which hopefully includes year-round E-15. The current SA weather conditions and their crops still in early development, it is too early for the markets to add any SA weather premium which means the slow 2-month holiday news cycle will feature some dull days.