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Afternoon Market Recap for Feb. 18, 2020

Wheat futures jump 4% higher.

Corn catches some spillover strength, while soybeans ease slightly

Wheat was the clear winner in Tuesday’s session, with most contracts climbing 4% or more higher on a round of technical buying spurred by a healthy round of U.S. export inspection data and lower production potential from major competitor Australia. Corn prices also tacked on another 1% today, thanks in large part to spillover strength from wheat. Soybean futures weren’t as fortunate, closing slightly lower as traders remain anxious for Chinese purchases to materialize.

With a few minor exceptions, much of the Midwest and Plains will see little to no rain or snow through Saturday, per the latest 72-hour cumulative precipitation map from NOAA. The Mid-South and Southeast could see moderate to heavy rains during this time, however. To close out the month, NOAA’s latest 8-to-14-day outlook calls for mostly wetter-than-normal conditions through the central U.S., with seasonally cool temperatures likely between February 25 and March 2.

Wall St. continues to show sensitivity to the latest coronavirus updates, with the Dow spilling 194 points lower in afternoon trading to 29,204, on pace to move lower for a third consecutive session. A disappointing earnings report from Walmart created additional headwinds. Energy futures were mixed – gasoline surged 2% higher, while crude oil and diesel saw moderate losses this afternoon. The U.S. Dollar firmed moderately.

Corn prices moved more than 1% higher Tuesday on some technical buying prompted by a healthy round of export inspection data from USDA this morning, along with spillover strength from surging wheat futures. March futures gained 5.25 cents to $3.83, with May futures adding 5.5 cents to $3.8750.

Corn basis bids were narrowly mixed at Midwestern processors and ethanol plants Tuesday, holding steady elsewhere across the central U.S. today.

Corn export inspections inched ahead of the prior week’s tally to reach 31.3 million bushels for the week ending February 13. That total was also on the high end of trade estimates, which ranged from 23.6 million to 31.5 million bushels. But 2019/20 marketing year totals remain at roughly half of last year’s pace, at 484.6 million bushels.

Mexico (10.1 million), Japan (9.2 million) and Colombia (5.3 million) continue to dominate U.S. corn export inspections, as this trio of countries has done often in recent weeks.

South Korean grain buyers purchased 5.3 million bushels of corn from optional origins in an international tender that closed earlier today. The grain is for arrival in early June.

Preliminary volume estimates were for 425,649 contracts, sliding slightly below Friday’s final count of 444,336.

Soybean prices tipped slightly lower Tuesday on some technical selling as traders await news of additional Chinese purchases after the country lifted some additional tariffs this past week. March futures dipped 1.5 cents lower to $8.9225, with May futures down a penny to $9.0225.

Soybean basis bids were narrowly mixed at interior river terminals Tuesday while holding steady at most other Midwestern locations today.

Soybean export inspections were for 36.5 million bushels last week, improving 55% week-over-week and landing in the middle of trade estimates that ranged between 25.7 million and 45.9 million bushels. Cumulative totals for 2019/20 remain 19% ahead of last year’s pace, with 1.039 billion bushels.

China’s participation remains muted for now, with the country only accounting for 7.5 million bushels in total U.S. soybean export inspections, falling just behind the No. 1 destination – Mexico – which reached almost 8.0 million bushels last week.

China signaled it will grant exemptions on retaliatory tariffs for nearly 700 U.S. goods, including soybeans, corn and wheat. This could have significant implications for soybean purchases in particular, as one trader noted: “Unless the state forcefully asks firms to apply for tariff exemption and buy U.S. soybeans, crushers would still go for Brazilian beans, based on market free will.”

Meantime, Bunge announced it has agreed to purchase two soybean processing plants in Brazil for $12 million from crusher Imcopa and assume that company’s debt. Bunge is already the largest soy processor in Brazil and is adding an additional potential annual capacity of 55.1 million bushels.

In the U.S., the National Oilseed Processors Association (NOPA) is reporting a record-breaking soybean crush in January, reaching 176.940 million bushels last month. That’s well ahead of the average trade estimate of 173.748 million bushels and December’s tally of 174.812 million bushels. NOPA is also reporting the highest domestic soyoil stocks since April 2018, reaching 2.013 billion pounds.

Preliminary volume estimates were for 278,307 contracts, moving slightly ahead of Friday’s final count of 268,987.

Wheat prices surged significantly higher on reports that Australia’s drought-stressed crops continue to decline, with the lowest production expected since 2008. March Chicago SRW futures gained 24 cents to $5.6675, March Kansas City HRW futures added 20 cents to $4.8550, and March MGEX spring wheat futures rose 14.5 cents to $5.3850.

Wheat export inspections took a modest step back this past week, landing at 18.4 million bushels. That tally was still good enough to land in the middle of trade estimates that ranged between 14.7 million and 22.0 million bushels, however. Cumulative totals for the 2019/20 marketing year are still 12.5% ahead of last year’s pace after reaching 651.5 million bushels. No single country accounted for a tremendous amount of U.S. wheat export inspections last week, but Mexico led the way with 2.9 million bushels.

Australia’s wheat production continues to plummet amid persistent drought stress, with the country’s agricultural agency ABARES now projecting a total haul of 557.4 million bushels – the lowest amount in more than a decade.

But in India, the country’s 2019/20 wheat production is expected to climb 2.5% from a year ago to reach a record 3.903 billion bushels amid a historically wet monsoon season. India’s rice production could also break records this season.

Turkey purchased nearly 9.2 million bushels of wheat in a series of international tenders that closed earlier today. The grain can be sourced from optional origins and is for shipment in March.

Japan seeks to purchase 3.4 million bushels of food-quality wheat from the U.S. and Canada in a regular tender that closes Thursday. Nearly 63% of that total is expected to be sourced from the U.S.

Bangladesh issued an international tender to purchase 1.8 million bushels of milling wheat from optional origins as the country continues to try to shore up its growing domestic demand.

Jordan made no purchases in its international tender for 4.4 million bushels of milling wheat from optional origins that closed earlier today. Bids were thought to be too high, and a new tender will likely be issued later this week.

Preliminary volume estimates were for 284,568 CBOT contracts, nearly doubling Friday’s final count of 143,974.


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