FIRST LOOK, by Duane Lowry
Wednesday, January 11, 2017
SUNRISE OUTLOOK OVERVIEW:
At 7:41 am> Grain/Soy Snapshots: Corn= 2 lower, Wheat= 4 1/4 lower, Soybeans= 1 1/2 lower.
*TOMORROW, USDA will issue Quarterly Grain Stocks, Monthly S&D/Production data and the Annual Crop Production Summary reports.
Here are the trade estimates:
Corn= 15.198 bil avg, range= 14.999-15.320, Nov USDA= 15.226, Last Year= 13.601
Yield= 175.3 avg, range= 173.4-176.5, Nov USDA= 175.3, Last Year= 168.4
Harvested Acres= 86.8 mil avg, range= 86.5-86.9, Nov USDA= 86.8, Last Year= 80.7
Soybeans= 4.380 avg, range= 4.339-4.440, Nov USDA= 4.361, Last Year= 3.926
Yield= 52.7 avg, range= 52.3-53.5, Nov USDA= 52.5, Last Year= 48.0
Harvested Acres= 83.0 mil avg, range= 83.0-83.4, Nov USDA= 83.0, Last Year= 81.7
US Ending Stocks 16/17>
Corn= 2.396 bil avg, range= 2.206-2.800, Dec USDA= 2.403, Last Year= 1.738
Soybeans= 468 mil avg, range= 430-515, Dec USDA= 480, Last Year= 197
Wheat= 1.148 bil avg, range= 1.100-1.340, Dec USDA= 480, Last Year= 976
World Ending Stocks 16/17>
Corn= 221.9 mmt avg, range= 218.0-225.0, Dec USDA= 222.3
Soybeans= 82.5 avg, range= 79.6-84.8, Dec USDA= 82.9
Wheat= 251.9 avg, range= 250.2-254.0, Dec USDA= 252.1
US Winter Wheat Planted Acreage Estimates>
All Winter= 34.2 mil avg, range= 31.7-36.4, Last Year= 36.1
Hard Red Winter= 25.1 avg, range= 22.6-26.7, Last Year= 26.6
Soft Red Winter= 5.6 avg, range= 4.8-6.6, Last Year= 6.0
White Winter= 3.5 avg, range= 3.3-4.3, Last Year= 3.5
Dec 1 Quarterly Stocks>
Corn= 11.250 bil avg, range= 11.073-11.800, Last Year= 11.211
Soybeans= 2.718 avg, range= 2.590-2.852, Last Year= 2.528
Wheat= 1.697 avg, range= 1.647-1.750, Last Year= 1.530
Day Session Expectations vs Night Session Tone:
March Corn: Support= $3.52-57, Resistance= $3.80.
*Near-term weakness below $3.55 will be limited. Search for ownership opportunities. **Read the corn comments below!
March Soybeans: Support= $9.85-95, Resistance= $10.45.
*Have respect/fear for the January USDA stats. I have no interest in any bearish stance at this time. I have no interest in any positions into tomorrow’s reports. Post-report focus will only be on searching for ownership opportunities. *Read corn and soy comments below.
March Wheat: Support= $4.10-20, Resistance= $4.48-53.
*Potential for near-term corrective weakness does exist. More upside potential exists in the weeks ahead. Search for ownership opportunities.
Outside Market Influences:
At 7:40 am> Price Snapshots: Crude was up $0.32, Gold up $2.20, Dow Index was up 5 and the US $ Index was up 45.
*Crude oil near-term recovery attempts need to be searched for selling opportunities. Charts appear capable of building downside momentum in the days ahead.
*Gold can falter from current levels. Downside risk remains to probing (possibly trending?) weakness below recent lows.
*US Dollar Index should be well supported around/above last week’s lows. Trending higher activity above recent highs remains probable in the weeks ahead.
*Dow Index is finalizing/confirming the process of establishing a major and long-lasting top. Charts appear very vulnerable to downside risks, with upside potential limited. Current levels offer selling opportunities.
Weather offers favorable/acceptable South American conditions. Dryness themes for the US Plains remain.
Wheat fundamental storylines are bearish, fully known and fully discounted. News is stale. However, tomorrow we will receive some new acreage figures that could help to switch fundamental focus away from the known and towards the unknown. Acreage is part of this unknown, as is the condition of the US winter wheat, which did experience some possible widespread winterkill issues. The unknown fundamental factors are of far more interest to me at this time than any tired discussion of excess supplies. I see merit in wanting to own the unknown. Charts/technical conditions are supportive. Short-term technical conditions could prompt minor corrective weakness during the next couple of days from current levels, but not significant weakness. Upside potential in the weeks ahead is much more significant than most are willing to ponder. Focus on searching for ownership opportunities.
Corn fundamental focus is on tomorrow’s reports. Soon after tomorrow’s reports, the focus will be on US acreage possibilities, with current conditions/economics/calculations and producer sentiment clearly suggesting a notable reduction in US planted corn acreage. **In the above table of estimates, I think the most significant fundamental storyline is in corn. That same fundamental storyline MIGHT be significant for soybeans as well, but my focus on what I am about to describe is primarily towards corn. If we reduce 2017 US corn acreage by 3.0 mil acres, which I believe is a rather conservative starting point and then extrapolate this past season’s data, we will find that US carryout levels will not increase. If we remember that this past season was nearly perfect in most areas for nearly the entire season, then it seems reasonable that we should question the ability to match last year’s yields, which means that we should expect a reduction in US carryout levels. If we lower bpa by 4.0 bushels, which would be higher than the 2015 season and match the 2014 season, then US carryout would likely fall by 350 mil or more bushels. What might be more interesting, is the fact that world ending stocks grew by 13 mmt during the current marketing season, vs last year. However, to achieve a 13 mmt increase in ending stocks, world production had to rise by 78 mmt! If US corn acreage is down 3 mil in 2017 AND US corn yields decline 4 bpa, that alone will lower world production by approximately 22.0 mmt. So, it is easy to imagine world corn carryout declining by a very notable amount during the next marketing season. All this is rather conceivable, without even talking about any notable US or global weather concerns. Fundamentally speaking, if you want an agricultural market to be bullish about, corn seems like a good place to start the discussion. Technical conditions have been and remain constructive, making minor near-term weakness well supported. Focus on searching for ownership opportunities. Any post-report weakness, IF it occurs, will be short-lived and of little significance.
Soybeans have been performing/stabilizing well during the past few weeks. However, the fundamental foundations are bearish and it is quite possible that USDA could deliver more bearish news tomorrow. It is almost equally as possible that they could deliver a slight reduction in US production. That said, based on my corn discussion above, it is very conceivable that fundamental focus into spring may still be quite bearish as 2017 US soybean acreage is expected to grow. This doesn’t seem to be a very supportive fundamental theme, considering last year’s US production exceeded total usage by approximately 250 mil bushels. So, it is clearly reasonable to assume that the fundamental narratives will remain bearish after tomorrow’s USDA reports. It is reasonable to assume that the knee-jerk reaction to tomorrow’s reports will be a bearish price move in soybeans. It is possible that such a reaction could be notable. HOWEVER, it is also quite possible/probable that such a reaction will be rather short-lived. I want no soy positions through tomorrow’s reports, but my post-report focus will only be on searching for ownership opportunities.
In summary, fundamental focus will be on TOMORROW’S USDA reports. Corn and wheat will be well supported in the days ahead for both fundamental and technical reasons, limiting any ability to build/sustain near-term weakness. Overall conditions suggest focus should remain on upside potential that exists in the weeks ahead, even in the soy-complex, after giving some nearby space for soybeans to experience a bearish probe.
Barge Values: Dec= +42 H
CH: Support= 3.54-57, Resistance= 3.80
**PROFILE: March Corn> Support and buying interest will build on probes below $3.55, limiting any ability to build sustainable downside momentum. We may not see any more near-term probing below $3.50. IN SUMMARY, more upside potential exists, possibly into the $3.80-90 zone in the weeks ahead. Search near-term weakness for ownership opportunities.
Barge Values: Jan= +40 F
SH: Support= 9.85-95, Resistance= 10.45
SMH: Support= 310-12, Resistance= 330
BOH: Support= 34.00-50, Resistance= 37.00
**PROFILE: March Soybeans> Overall recent price action has been constructive/stabilizing/supportive. January USDA stats are always a dangerous environment. IN SUMMARY, I have no interest in any bearish stance, despite bearish fundamental profiles. Respect/fear of the January USDA data will keep me sidelined in soybeans.
Barge SRW Values: Jan= +40 H
WH: Support= 4.10-20, Resistance= 4.48-53
**PROFILE: Chicago March Wheat> Technical conditions are capable of building upside momentum in the weeks ahead. Any short-term corrective weakness attempts will be well supported under $4.20. IN SUMMARY, search for ownership opportunities.
GLOBAL HIGHLIGHTS & HEADLINES: .
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© 2017 Duane Lowry. All Rights Reserved.