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I can think of worse ways to begin the first full week of December as we have grain and soy markets all residing in the positive column. Currently, we have January beans above the 10.00 level for the first time since the 9th of November and actually only the 5th time above that level since the 1st of August. March corn is also up to the highest point attained since the fateful November report and is pressing against key resistance at the 3.58/3.60 zone, and March wheat has been able to extend beyond tough resistance at the 4.40 level. This has lifted the combination corn, bean, wheat chart to the highest level traded since September. We need be careful, or this could develop into a legitimate advance and of course everyone “knows” that the supplies are huge so that just cannot happen. (That comment is supposed to be dripping with sarcasm.)
It would appear that at least a portion of the buying interest this morning is being stimulated by dry weather that has beset Argentina as they progress into their growing season with the forecast for more of the same. Keep in mind as well that corn production in Brazil has been trimmed due to lower acreage with Safras & Mercado as of Friday projecting a crop of 90.52 MMT, which could be 17% below this past year's output. Granted that would not exactly move the world supply into a tight situation but as the old saying goes, a journey of a thousand miles begins with a single step and realistically the South American growing season is just getting underway, so all the risk is yet in front of us.
The macros are working against us this morning as the equity markets, and the dollar are celebrating the vote in the Senate early Saturday morning to approve a tax reform package, with metals and energies, turned the other direction. I suspect some of the euphoria in equities will wane fairly quickly but for now, we have a situation of buy the rumor, buy the fact and it would not be shocking to see these markets remain optimistic right through the end of the year.
Does this mean that the grain/soy complex will be unable to extend higher from here? I think not and continue to look for additional short covering in the grain and flat out buying in the beans and bulls should enjoy that Christmas turkey after all.
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