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Morning Market Review for Feb. 24, 2020

Increased international spread of coronavirus hits grains hard. (Comments are updated by 7:30 a.m. Central Time.)

Commodities fall as estimated global output losses near $1 trillion due to coronavirus

  • Corn down 3-4 cents
  • Soybeans down 12-13 cents, soyoil down $0.82, soybean meal down $2.2
  • Wheat down 5-9 cents

*Prices as of 6:55am CST.

Corn: March futures shed $0.0375 this morning to $3.7325. May futures were down $0.0375 as well to $3.7975.

Cash corn prices ended the week slightly higher across a few locations in the Midwest. Processor and elevator demand rose $0.02-$0.04 in the Western Corn Belt at locations in Blair, Nebraska and Council Bluffs, Iowa. Export demand strengthened basis $0.01 on the Illinois River for the week. Corn prices have provided little incentive to farmers to book new sales as the new week begins.

CFTC’s Commitment of Traders report was issued last Friday. Speculators were slightly bullish on corn for the week ending February 18 as they increased their interest in corn, adding 21,014 long contracts. They also added 11,292 short contracts to end the week in a net selling position by 61,461 positions after a week that saw consistent sideways price movement from March futures.

South Korea looked to continue their buying spree of corn this morning, announcing two separate purchases of 2.6 million bushels of corn. Both purchases of feed corn were private deals and ranged in price from $5.72/bushel to $5.85/bushel for late June delivery. ADM and CHS are believed to be the sellers.

Ukrainian corn exports fell 2.2 million bushels last week to 26.3 million bushels, according to preliminary data from APK-Inform consultancy. Wheat exports rose by nearly two-thirds or 5.0 million bushels to 7.5 million bushels as overall grain exports out of Ukraine strengthened to 45.9 million bushels last week on shipments to China, Egypt, and Turkey. Ukrainian grain exports are 41.61% higher this year than the same time last year as Black Sea grain prices become increasingly competitive on the world stage.

Soybeans: March soybean futures took the largest hit across the grains complex this morning due to the rapid spread of the coronavirus. March futures lost $0.12 in overnight trading to trade at $8.785 to start the week. March soybean meal futures continued their downward price trajectory, down $2.2 to $287. A 3% drop in Malaysian palm oil futures prices to start the week due in large part to higher output expectations and lower exports to China and India led March soybean oil futures prices $0.82 lower to $29.82 this morning.

Export demand drove soybean prices higher across the Corn Belt last week. River terminals strengthened basis $0.02 along the Illinois and Mississippi Rivers to end the week. Processing facilities in Decatur, Illinois and Des Moines, Iowa saw a $0.03 price increase as well. Soybean sales were slow last week but picked up on Friday after a March futures price rally

Speculators eased their bearish intentions on soybeans from the previous week, trimming 3,316 short positions from the week ending February 18. Money managers ended the week in a net short position by 89,763 contracts as upwards price movement for the March futures contract was not enough to reverse an overall bearish sentiment towards soybeans.

Speculative traders also increased bearish interests on soybean meal futures in last week’s Commitment of Traders report, adding 5,610 short positions to settle at a net selling position to the tune of 72,468 contracts. Hedge fund managers were spooked by a weakening vegetable oil complex as well as they reversed 5,149 long positions to short, adding a total of 7,892 short positions to end the week. Managed money remained net buyers of soybean oil by 39,628 positions for now, but if palm and soybean oil futures prices continue their downward trajectory on reduced demand from India and China, speculators may reverse their long position altogether.


Wheat contracts price changes

Investors flocked to the safe havens of the dollar this morning as concerns of the rapid international spread of coronavirus led to the ICE Dollar Index strengthening 0.31% this morning. Wheat futures prices across all categories deteriorated five to nine cents as the economic fallout compounded.

Cash prices for both soft and hard winter wheat were unchanged last week as futures prices ended lower due in large part to an easing export market at the end of the week. Farmer sales were slow to close the week. A cold snap last week did not raise significant concern for winterkill issues. Rainfall early this week will continue to favor conditions as the winter wheat crop begins to emerge from dormancy.

Protein premiums on hard red winter cash wheat delivered to or through Kansas City by rail were reported as shown below through the weekend:

wheat protein content, basis range, change

Last Friday’s Commitment of Traders report found speculators to be decidedly bullish on soft wheat after a nearly $0.20 March futures price rally ended the week. Speculative traders added 10,274 long positions last week while simultaneously slashing 8,501 short positions and remained situated in a net bullish position by 64,715 contracts. Kansas City hard red winter wheat echoed similar bullish sentiments as money managers added 2,958 long positions to their 14,312-contract net long position after a $0.17 rally in March HRW futures on February 18.

Despite the bullish sentiments on soft and hard red winter wheat from speculators in last week’s report, spring wheat in Minneapolis lost favor from speculative traders as they added 5,688 short positions to their net selling position. An $0.0875 weekly gain on March futures could not sway managed money’s bearish sentiments on spring wheat as speculators ended the week in a net short position by 11,891 contracts.

Saudi Arabia issued an international tender for 26.3 million bushels of wheat yesterday. The purchase was made at $6.73/bushel for April to June delivery. Though there was no news as to the seller in the transaction, Russia and the Black Sea region have dominated market share in the Middle East as of late and would be widely expected to be sourcing the deal.

Weather: Rain will douse much of the already saturated southern Corn Belt today with up to an inch of precipitation today according to NOAA's 24-hour precipitation monitor. A snow system in the Northern Rockies will move into the Northern Plains by this evening, bringing up to 1-5 inches of snow to the Northern Corn Belt through tomorrow and Wednesday.

Financials: China announced the easing of import restrictions on beef products and pet food overnight. The Chinese customs office announced Monday the ban on beef and relating products harvested from American cows greater than 30 months of age would be immediately lifted. Additionally, pet food containing ingredients from the ruminant animals was also allowed after having been banned due to the trade war. Meat shortages in China due to African swine fever have led to the relaxed import restrictions as China continues to contain the economic fallout of the coronavirus outbreak.

The infamous coronavirus outbreak has increased the pace of its global spread, sending Dow futures plummeting 716 points or 2.47% down to 28,265 points ahead of the opening bell. Cases in the economic hub of Milan, Italy region skyrocketed to 150 as of yesterday, up from three cases last week. The area was placed on quarantine by the Italian government in an effort to contain the spread of the virus in what has quickly become the worst occurrence of the disease outside of the Asian continent. The worldwide economic toll of contraction due to the virus is racking up a $1 trillion price tag in lost output.

Energy futures posted losses on the news as the April Brent Crude Oil contract fell $2.42/barrel or 4.14% to $56.08/barrel prior to the opening bell. March ultra-low sulfur diesel futures prices were on track to post a 3.79% loss to $1.6227/gallon this morning as well.

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