Roundup: CBOT agricultural futures rally

Chicago (US), November 14: CBOT agricultural futures rallied in the past week as the U.S. Department of Agriculture (USDA) November report failed to offer any bearish surprise, Chicago-based research company AgResource noted.
The U.S. central bank is in a quandary as U.S. inflation rose by over 6 percent in October. AgResource bet that the central bank will be more dovish than hawkish, and therefore is longer term bullish of agricultural futures. But it warns that this is not the time to chase a rally.
Corn futures recovered as the USDA in its November report eliminated the worst-case supply scenario by raising U.S. production by a modest 43 million bushels, which will be offset by higher industrial use. The market is now accounting for final 2021-2022 U.S. end stocks of 1.2-1.4 billion bushels, tighter than previous expectations of 1.5-1.7 billion bushels. The coming decline in U.S. inventories raises the burden on South American weather from December to February.
Since the release of the USDA October report, there has been a clear "buy the break" mentality on behalf of speculators and end users. This mentality will stay intact until the market can confirm that Argentina has avoided La Nina-based drought. Additionally, the U.S. interior cash market remains exceptionally strong as supply pressures fade and corn's demand pull will be sizeable in winter and spring.
Fair value in the near term for March corn lies between 5.50 dollars and 6.00 dollars, with the upside raised to 6.25-6.75 dollars if dry climate forecast for December-January materializes across Argentina and Southern Brazil. AgResource holds a bullish outlook for corn.
Wheat futures ended sharply higher with new contract highs set in all major world markets. Paris wheat futures set a historical high in euro terms.
The USDA was forced to increase global import demand as the pace of trade to date could no longer be ignored.
Wheat outlook is straightforward: either the United States benefits from export demand growth February onward or markets worldwide must rise further to slow demand. The slowing of global demand growth will be difficult as importers no longer have large stocks to draw from.
Slowing EU export demand will also be tough as Russia's export tax continues to rise on a weekly basis.
Initial resistance for wheat lies at 2014's high of 8.55 dollars. However, if world trade fails to slow in the next 60 days or excessive rainfall returns to East Australia, the upside rises to 8.75-9.00 dollars.
Soybean futures ended the week with a rally and finished higher. The market found early-week support from the USDA November report that did not offer any bearish surprises. The USDA lowered the national soybean yield by 0.3 bushel per acre. The report took 40 million bushels off the export projection, and end stocks were estimated at 340 million bushels, up just 20 million bushels from October.
The Unites States exported a record large 136 million bushels of soybeans last week. However, export demand will begin to slow as cash traders pay increased attention to lower-priced new crop soybeans in Brazil.
AgResource sees the soybean market transitioning into a broad range. Long-term support is offered below 11.50 dollars while short crops in South America are needed to support a CBOT soybean rally beyond 14 dollars. U.S. domestic market remains exceptionally strong, with estimated cash crush margins ranging from 2 dollars to 3 dollars per bushel. AgResource suggests monitoring South American weather closely as La Nina looks to be one of the strongest on record. The odds of weather scare rallies are high.
Source: Xinhua