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Morning Market Review for Feb. 19, 2020

Profit-taking and Chinese demand weigh on grains. (Comments are updated by 7:30 a.m. Central Time.)

Traders sell yesterday’s wheat rally in overnight trading

  • Corn down 1-2 cents
  • Soybeans down 4-5 cents, soyoil down $0.47, soybean meal down $0.2
  • Wheat down 6-8 cents

*Prices as of 6:50am CST.

Corn: March corn futures prices followed the rest of the grain complex lower overnight, shedding $0.0175 to $3.8125. May futures were down $0.0175 as well to $3.8575.

Cash corn prices were mostly steady yesterday. Basis on the Illinois River rose a cent to $0.02 above March futures. A Decatur, Illinois processing facility weakened basis $0.02 to $0.18 over March futures. Country movement of grain was light as growers waited for higher prices, despite a $0.04 rally in March futures yesterday. Grain merchants reported hesitation from growers to book sales until prospects from USDA’s annual Agricultural Outlook Forum starting tomorrow had been announced.

South Korea continued its healthy appetite for feed corn as a purchases of 5.1 million bushels were reported in private deals yesterday. A separate South Korean feed buyer had purchased 5.3 million bushels on Tuesday.

Corn weighed and inspected for export for the week ending February 13 rose 262,952 bushels higher than the previous week to 31.3 million bushels in a positive sign for export demand according to USDA’s weekly grain inspections report. Corn export pace continues to lag behind last year’s rate as only half as many bushels of corn have been inspected for export in the 2019/20 marketing year compared to the same time in the last marketing year.

Soybeans: Concerns over Chinese demand weighed on soybean markets overnight, despite measure announced yesterday by China to curb import tariffs on agricultural products including soybeans. March futures dropped $0.0425 to $8.88 as a result. March soybean meal futures traded unchanged to $0.2 lower to $292 on the worrisome sentiment.

Malaysian palm oil futures prices tumbled 3.5% in overnight trading as higher production and reduced demand from China and India rattled the vegetable oil complex. Palm oil also faces potential long-term demand reductions as European food companies have requested palm producers in Southeast Asia to reduce the content of mineral oil hydrocarbons in the refining process. March soybean oil futures lost $0.47 on the news, down to $30.01.

The cash market for soybeans was also mixed yesterday. Basis on the Illinois River weakened $0.04 to trade at $0.02 above March futures. A Des Moines, Iowa location raised basis $0.05 to end the day at $0.30 under March futures prices. Farmer sales were thin across the Midwest as March futures prices dropped $0.02 after the National Oilseed Processors Association posted a record 176.94 million-bushel crush rate in January, up over 2.1 million bushels from the December estimate.

Soybeans weighed for export inspection rose by nearly 13 million bushels to 36.5 million bushels in yesterday’s weekly grain inspections for export report as Chinese purchases continued to strengthen U.S. soybean exports. Chinese demand typically eases this time of year as the Brazilian soybean crop comes to market.

Bunge has submitted a bid to purchase two Brazilian processing plants. The sale would cement Bunge’s position as the top oilseed producer in Brazil, strengthening their lead over rival Cargill. Bunge took advantage of a falling Brazilian real, offering $12 million for the plants owned by local processor Imcopa. Bunge would also assume $229 million in debt obligations as part of a bankruptcy restructure.

Wheat:

Wheat contracts price changes

 

A round of profit-taking hit wheat futures prices after an impressive rally yesterday following news of lower production out of Australia. The ICE Dollar index offered little help to losses, rising 0.05% higher this morning.

Cash prices for both soft and hard winter wheat were unchanged yesterday, despite an $0.18 rise in March futures prices for Chicago wheat and an $0.1675 rise in Kansas City wheat due to reductions in the Australian crop. Farmer sales were light following yesterday’s rallies.

Protein premiums on hard red winter cash wheat delivered to or through Kansas City by rail were unchanged yesterday, as shown below:

wheat protein content, basis range, change

U.S. wheat weighed for export inspections slowed over 11% from the previous week to 18.4 million bushels. U.S. wheat has struggled to remain competitive with French and Black Sea wheat, though inspections for export are 12.55% higher in 2019/20 than during the same period in the previous marketing year.

A brief cold snap will continue through the Midwest and Plains this week. Cooler weather is expected through the central U.S. through the end of February. The winter wheat crop should remain unharmed by the cold snap, unless the lows drop further than anticipated. Rainfall in the Southeast will continue to put pressure on the Mississippi River system as the river swells from the Southern precipitation as well as drainage from excessively wet fields in the Upper Midwest.

Egypt has enough strategic wheat reserves on hand for 5.3 months, as reported by the state news agency overnight. The world’s largest wheat importer will seek to purchase nearly 147 million bushels of wheat starting April 15 to steady supplies following an Egyptian planting season that resulted in a slightly smaller than expected acreage.

Japan had issued a 4.4 million-bushel feed wheat tender two weeks ago but failed to receive any offers for it as the tender came to a close today. It is expected to reissue the tender today in the same amount and for arrival in Japan by July 30.

A consultancy group predicted a 3.2% contraction in the 2020 Ukrainian grain harvest. Heavy fall rains led to a smaller winter wheat acreage as planted acreage dropped to 1.6 million acres. Corn acreage was unchanged.

Weather: Snowfall will move through the Plains this evening and tomorrow morning before turning into rain in Texas according to NOAA's short-range forecast. A jet stream will continue to blow sub-zero temperatures into much of the Midwest today and tomorrow. The Midwest can expect temperatures warming into the 40’s by Friday afternoon.

Financials: Inputs supplier Nutrien released a smaller-than-anticipated quarterly profit yesterday as reduced global demand for fertilizers takes its toll on the Canadian company. The world’s largest potash supplier also readjusted full-year earnings forecasts downwards due in large part to lower potash prices. A delayed harvest season last fall led to many fall fertilizer applications being delayed until spring, especially in Northern states, sending Nutrien’s inventories higher as sales stalled. But trade deals with Canada, China, and Mexico gave the company hope as they decreased their net loss from continuing operations to $48 million from $296 million in the previous year.

China announced measures to support small local businesses struggling to stay afloat due to the coronavirus outbreak yesterday, sending Dow futures up 0.29% to 29,295 points. Energy prices rose on the sentiment, with the March light crude futures price leading gains with a $0.66/barrel increase to $52.74/barrel in pre-market trading this morning.

Charts:

2-19 - Graphic 1 - Corn.PNG

2-19 - Graphic 2 - SB.PNG

2-19 - Graphic 3 - SRW.PNG

2-19 - Graphic 4 - HRW.PNG

2-19 - Graphic 5 - MN Wheat.PNG

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