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Grains Move Higher, Look to Trade Talks

Markets look to trade talks next week.

For the third day in a row now we found two rounds of moderate size buying Friday morning. Again, we can look at this and consider it was likely light fund buying. All grains are moving higher leading into the Monday/Tuesday meeting between the U.S. and China. It is possible that corn traders are looking for at least the possibility an agreement there could mean we would eventually sell 3 MMT of corn to China. Normally a sale that large would be tough to believe but if there is at least some hope that if all tariffs are removed it would also come with the benefit of light Chinese buying of corn.

Ethanol came in at 1011K which is again disappointing compared to USDA expectations, yet not as bad as some previous weeks have shown. This does make the 7th disappointing report in a row which is enough to suggest on the next Supply/Demand report we should expect USDA to lower ethanol use slightly. Speaking of Supply/Demand reports it was made official today that the January 11th crop report will be postponed with no makeup date announced until government funding is restored. We did not see a final minute surge of buying Friday like seen Thursday, for now we might want to assume that was a one-day event.

Short term it is clear that corn traders are putting in support leading into that Chinese meeting just like wheat and beans so we will need to pay close attention to what comes out of that meeting on Tuesday. Longer term unless there is a surprise Chinese buying announcement we would have to expect a continued sideways trade with the January report postponed and still lacking any daily or weekly export reports.

Bulls

  • There is enough potential interest in China corn buying to support this market going into next week's meeting

  • Any Chinese buying would still be relatively minor with most estimates at 3 MMT

  • Speculative buying is still being seen each day this week which could potentially be light fund buying

Bears

  • Ethanol came in slightly disappointing at 1011K
  • After 7 weeks of disappointing export reports we can assume USDA will lower ethanol use at the next crop report
  • March is approaching the major resistance area which is any price over 385 for March

Rich Nelson
Allendale Inc.
815-578-6161


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