While US corn and wheat are relatively cheap in the world market versus other major producers, the lack of news amid gov’t shutdowns and trade disputes has kept a lid on price. That was until today as nearby shorts across the grain complex covered positions. Despite earlier news that Russia will not place quotas on grain exports, internal wheat and flour prices have returned to 2016 highs. Therefore Russian FOB wheat has become expensive on the world market. Black Sea Prices are up another $3/MT to new seasonal highs. There’s also talk that US corn has been offered at even money with Argentina harvest price into Asia for late winter delivery. Both grains are competitive for sizable world tenders moving forward and for today there was a reason to rally. We have traded near key resistance in corn, while March KC wheat sits just above key resistance at 5.03.
Beans and Meal had reasons to rally as well as El Nino type conditions in the Southern Hemisphere persist. Too Hot and Dry for much of Brazil while the Northern half of Argentina remains too wet creating damage to crops. Forecasts don’t look to change that much into February, while crop scouts have noted smaller crop sizes. Meal has a major bull story if weather in Argentina remains suspect and their domestic bean crop damaged. Others will argue a lack of meal demand due to the African swine flu virus in China. Argentinean weather issues will take precedent over China as Argentina is the top bean crusher in the World, and would prompt funds to cover shorts that could result with a potential move from 3.12 March meal, to at least 330-340, in my view. Beans settled above a key area this week at 9.06. A fifty percent retracement (12 month high/low) could push them to 947 if weather in South America remains an issue into February, or if a trade framework with China is announced in the coming days/weeks. In fact Secretary Mnuchin was cited by the WSJ late this morning that tariffs could be retracted with China. Rumors maybe, but the grain markets listened today in my view.
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