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Soybeans Poised To Continue Move Higher With Improved Trade Talks; Corn And Wheat Could Move Low Then High

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Includes: CORN, SOYB, WEAT
by: Andrei Evbuoma
Andrei Evbuoma
Commodities, energy, oil & gas, research analyst
Summary

USDA posts weak net export sales data for corn, wheat, and soybeans.

North Dakota corn harvesting to continue to lag with snow on the ground and intervals of cold, wintry weather in the outlook.

Overall, the weather pattern (mild and variable) will be in favor for the grain belt.

Investment Thesis

With the U.S. and China trade talks making progress, soybeans could be on the move up. As for wheat and corn, upside potential will increase in the days ahead as December is a month that usually finds a bottom.

Wheat and corn finish Thursday lower after weak net export sales data; soybeans slightly higher on positive trade talk news

On Thursday, the U.S. March corn futures were seen down 0.69% to $3.7638, with the U.S. January soybean futures seen up 0.78% to $8.8488 and the U.S. March wheat futures seen lower 0.78% to $5.2388. For the less-volatile, unleveraged Teucrium ETF grain products, the Teucrium Corn ETF (CORN) was seen lower on Thursday, down 0.54% ($0.08) to $14.37, with the Teucrium Soybean Fund (SOYB) up 0.47% ($0.07) to $15.00, and the Teucrium Wheat Fund (WEAT) lower 0.72% ($0.04) to $5.50.

Figure 1 below is a price trend chart of the front-month March futures contract for corn over the past week.

Source: Investing.com

Figure 2 below is a price trend chart of the front-month January futures contract for soybeans over the past week.

Source: Investing.com

Figure 3 below is a price trend chart of the front-month March futures contract for wheat over the past week.

Source: Investing.com

On Thursday, the March Chicago Soft Red Winter Wheat (SRW) futures were seen down 3.6 cents to $5.236, with March Kansas City Hard Red Winter Wheat (HRW) futures down 5 cents to $4.354. MGEX's Hard Red Spring Wheat (HRSW) December contract was up $0.016 to $4.980.

Figure 4 below is a price trend chart of the front-month December futures contract for spring wheat.

Source: MGEX

USDA's net export sales report weak across the board; nearly 300k tons of beans sent to China

The United States Department of Agriculture (USDA) released its weekly net export sales report for the week ending November 28, Thursday morning.

The 2019/20 wheat export sales for the week ending November 28, 2019, came in at 228,100 metric tons. The 228,100 metric tons were down 63% from the prior week and 45% from the four-week average. The main buyers of the 2019/20 wheat crop last week were from unknown destinations (102k).

The 2019/20 corn export sales for the week ending November 28, 2019, came in at 546,100 metric tons. The 546,100 metric tons were down 32% from the prior week and 18% from the four-week average. The main buyers of the 2019/20 corn crop last week were from Japan (237k), and unknown destinations (131k).

The 2019/20 soybeans export sales for the week ending November 28, 2019, came in at 683,800 metric tons. The 683,800 metric tons were down 59% from the prior week and 55% from the four-week average. The main buyers of the 2019/20 soybean crop last week were China (299k), Thailand (90k), and Indonesia (79k).

Weather pattern to remain in a mild and variable state over the next couple of weeks; North Dakota corn harvesting will continue to be rather slow due to existing snow coverage

Similar to my previous article, the weather pattern over the next couple of weeks is progged or expected to be mild overall and variable with intermittent shots of cold air sprinkled in.

After a Thanksgiving week that was cold and stormy, this week (driven by a split-flow pattern in the atmosphere) has been and will continue to be through early next week mild and quiescent. However, by early next week, the upper level weather pattern is expected to once again (similar to Thanksgiving Week and multiple instances in November) become amplified/wavy with upper level ridging/higher heights over western North America (from the western U.S. to the Arctic Circle) and resultant downstream troughing digging over central and eastern Canada into the northeast quadrant of the U.S. (i.e., from the northern Plains to the Great Lakes and Northeast). This setup will allow for unseasonably warm air to surge into Alaska and the Arctic Circle, tap into the Arctic cold air mass there, dislodge some of it, and send it southward into central and eastern Canada and the U.S. This cold shot will be transient spanning roughly from Tuesday to Thursday before we see temperatures moderate/warm once again. So while temperatures will be as much as 30 degrees warmer than normal over Alaska and the Arctic, temperatures will be as much as 30 degrees colder than normal across parts of central and eastern Canada and the U.S. The strongest of the cold here in the states will be across the northern Plains, Upper Midwest, and Great Lakes.

Once again, temperatures amid the passing of this shot of cold air will moderate across the central and eastern U.S. late next week through the weekend before another potential shot of colder air moves in during the week ending December 20.

There have been major differences in the handling of the pattern specifically in the 10-15 day time frame or for the week ending Dec. 20. The GFS model has been overly cold while the ECMWF model has been mild. I expect for some sort of compromise between the two models with the GFS scaling back on the intensity of the cold while the ECMWF model adds some cold/HDDs. This would support things on the colder side of normal for the week ending Dec. 20 but nothing too extreme and instead cold anomalies closer to normal levels. Both models do show warmth in Alaska and the Arctic (western side of NA) which supports the risks for cool/cold air intrusions into Canada and the Lower 48, but again, nothing seen as extreme at this time. Both models do support the cold coming during the first half of the week ending Dec. 20 before things moderate/warm during the second half of that week. So expect for a roller coaster ride in temperatures and an overall mild pattern for much if not all of the next couple of weeks.

Figure 5 below is a map from the 0z European ECMWF ensemble depicting the 4-9 day (December 9-14) temperature pattern.

Source: WeatherBell

Figure 6 below is a map from the 0z European ECMWF ensemble depicting the 10-15 day (December 15-20) temperature pattern.

Source: WeatherBell

Figure 7 below is a map from the 06z American GFS ensemble depicting the 10-15 day (December 15-20) temperature pattern.

Source: WeatherBell

Figure 8 below is a map from the 0z European ECMWF ensemble depicting the Day 15 (December 20) temperature pattern.

Source: WeatherBell

Final Trading Thoughts

Once again, from a technical standpoint, agriculture commodities are becoming very attractive to buy due to the lowered prices. December is usually when we see prices at their lowest as the season winds down. That said, it's hard to tell whether we've reached a bottom or not in prices, but I expect for upside potential to begin to increase in the days/weeks ahead. Soybeans will see near-term improvements based on the U.S. and China trade talks making progress.

Stay Tuned For More Updates!

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.