MarketsFarm – The seasonal slowdown in the North American grain and oilseed markets has traders in the Chicago futures taking direction from shifting weather forecasts out of South America, with technical chart signals also at play in the futures heading into the New Year.
“The weather in South America is probably the number one influencer right now,” said John Weyer, director of commercial hedging with Walsh Trading in Chicago. Parts of Brazil have been too wet and others too dry, which has caused delays seeding the country’s soybean and second corn crops.
Read Also
Alberta crop conditions improve: report
Varied precipitation and warm temperatures were generally beneficial for crop development across Alberta during the week ended July 8, according to the latest provincial crop report released July 11.
Private forecasters have been revising their calls on the size of the crops in Brazil and South America, with the U.S. Department of Agriculture set to release their next estimates in their monthly supply/demand report on Friday, Dec. 8.
While the December report typically only includes minor revisions, surprises are always possible and could sway the futures. “That’s why they call them surprises,” said Weyer, adding that any major changes in the carryout numbers would be followed closely.
From a chart standpoint, corn futures hit contract lows in late-November but have since mostly trended higher. Weyer said there was no real fundamental reason for the rise, but expected the grain found spillover support from advances in wheat.
Chicago soft wheat futures also hit contract lows at the end of November before climbing higher, with the March contract recovering from a low of US$5.5625 per bushel on Nov. 27 to settle at US$6.3350 on Dec. 6.
Solid Chinese demand contributed to the rally in wheat, with the country purchasing just over one million tonnes of soft red winter wheat from the U.S. in the span of three days this week.
Going into the year end, if there’s another large Chinese purchase taking prices above US$6.50, Weyer said the next upside target for March Chicago wheat would come in around the 200-day moving average near US$6.70.
Meanwhile, soybeans have come under some pressure and dipped below the US$13.00 per bushel level in recent sessions. A close below US$12.95 would set the stage for a test of the next downside target of US$12.75, according to Weyer.
— Phil Franz-Warkentin is an associate editor/analyst with MarketsFarm in Winnipeg.
