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Morning Market Review for Feb. 25, 2020

Corn, beans recover from yesterday’s coronavirus selloff. (Comments are updated by 7:30 a.m. Central Time.)

Export demand strengthen beans and corn, but slow international movement weaken wheat

  • Corn up 2-3 cents
  • Soybeans up 4-6 cents, soyoil down $0.29, soybean meal up $1.7
  • Chicago and Kansas City wheat down 1-2 cents, Minneapolis wheat up 1 cent

*Prices as of 6:50am CST.

Corn: Strong export demand after futures prices recorded contract lows yesterday brought March corn futures $0.015 higher this morning to $3.7375. May futures were also up $0.015 to $3.7775 to start the day.

Cash corn prices were mostly steady yesterday, though basis strengthened $0.02 to $0.20 ahead of March futures at a Decatur, Illinois processing facility and jumped up $0.08 to $0.01 over May futures prices at a Mississippi River terminal in Davenport, Iowa. Falling futures prices prevented new sales from being booked, but previously contracted corn moved onto the market as weather warmed across the Midwest.

Yesterday’s grain inspections for export report released weekly by the Agricultural Marketing Service (AMS) saw another strong week for corn exports. Corn export inspections rose 4.6 million bushes from the previous week to 35.9 bushels on growing demand from Japan and Central America. The total for the week ending February 20 was nearly 6 million bushels or 19.9% higher than inspections for the same period a year ago, signaling corn export demand may be on pace for a recovery in the second half of the 2019/20 marketing year. Click here to read the full Farm Futures’ analysis on yesterday’s weekly USDA-AMS Grains Inspections report.

Record-low futures prices in yesterday’s session spurred a round of buying from South Korea. The following sales were recorded in overnight trading:

  • South Korea purchased 2.1 million bushels of corn in an international tender yesterday. The tender, which was contingent sourcing from optional origins, sold for $5.31/bushel c&f, including unloading fees. Delivery on the shipment is expected to be in late June. The selling house was believed to be Dreyfus.
  • South Korea issued an international tender to purchase 5.4 million bushels of corn from the U.S. The tender closes today, at which time more information about sourcing will be available.
  • An international tender to purchase 2.7 million bushels of corn was issued by South Korea last night as well. The sale was priced at $5.31/bushel including unloading costs. Sourcing is expected to be from optional origins.

Soybeans: Soybean futures prices recovered after yesterday’s selloff, adding $0.04 to the March contract to open at $8.7875. Favorable weather forecasts in Asia increased palm oil production expectations but sent the vegetable oil complex lower as March soybean oil futures were down $0.29 to $29.2 in premarket trading. March soybean meal futures rose $1.7 to $287.8/ton.

Cash soybean prices were unchanged from last week. Many farmers are believed to be lowering their price targets to $9/bushel and have been unwilling to book sales until realizing that price point in the March futures prices.

USDA announced a soybean sale to Mexico. The neighbor to the South purchased nearly 6 million bushels of soybeans via private exporters. Delivery is expected to take place in the 2019/20 marketing year. While Mexico is not traditionally a key buyer of U.S. soybeans, the sale is a positive sign for the progression of the USMCA trade deal, which is currently being reviewed for expected passage by the Canadian Parliament, according to Canadian Minister of Agriculture Marie-Claude Bibeau at last week’s USDA Ag Outlook Forum.

Soybean inspections at export terminals fell by 15.1 million bushels for the week ending February 20 to 21.8 million bushels. Inspection pace backed off by over 40% last week as Chinese demand slowed as the Brazilian soybean crop neared harvest completion. Larry Shonkwiler with Advance Trading goes further into depth on the questionable environment surrounding soybean exports in yesterday’s Ag Marketing IQ column, found here.

Wheat:

Wheat contracts price changes

A strong grain crop forecasted in Ukraine, rising dollar, and weak export demand weighed heavily on the wheat complex this morning. Minneapolis futures prices traded fractionally higher ahead of the opening bell, while Chicago and Kansas City futures prices edged lower. The ICE Dollar Index slipped 0.01% overnight as investors calmed down after yesterday’s coronavirus selloff.

Cash prices for both soft and hard winter wheat were unchanged yesterday as falling futures prices due to the coronavirus selloff yesterday and low export demand numbers weighed heavily on farmers’ selling prospects. Protein premiums on hard red winter cash wheat delivered to or through Kansas City by rail rose $0.10 for protein grades between 12.0-12.4%, as shown below:

wheat protein content, basis range, change

Wheat conditions in the U.S. Plains improved from January according USDA’s monthly wheat condition report. Kansas’ good to excellent crop condition ticked upwards by 1% from last month to 35%. Dry weather in Western Kansas set the Sunflower State’s growing conditions back significantly from last year’s rating of 51%. An unusually warm February sent Montana’s wheat condition falling 34% from January to 37% good to excellent. Overall, conditions moved steadily higher for hard red winter crops in the Plains as well as soft red winter wheat in Southern Corn Belt states Illinois and Kentucky.

Wheat exports continued to lose steam last week according to the weekly Grain Inspections for Export report released weekly by USDA-AMS. Wheat inspections for export dropped 18.2% or 3.4 million bushels to 15.1 million bushels. Demand from Southeastern Asia countries helped prop up wheat exports last week, but export inspections for the week ending February 20 were 46.4% lower than those of the same time a year ago. The U.S. is the second-largest exporter of wheat in the world behind Russia.

Weather: Snowfall will cover much of the Central Plains today, dropping 1-3 inches as the system moves east into the Upper Mississippi Valley by Wednesday. In the meantime, rainfall will persist across the eastern half of the Corn Belt as up to a half inch is expected in areas between Missouri and Ohio today, according to NOAA's 24-hour precipitation forecast.

Brazil will see a split weather pattern across the next 10 days, with warmth prevailing in the North and temperatures below average cooling the South. Heavy rainfall totals in the Center West have the potential to delay fieldwork. Rainfall is expected to be 3-5 inches above normal in the Mato Grosso region, benefiting the recently planted second corn crop.

Below average rainfall in Argentina will hinder corn and soybean development over the upcoming 10 days. Below average temperatures will begin to heat up in the next five days as soil moisture levels begin to deteriorate due to a forecasted precipitation rate 1-2 inches below normal for this time of year.

Heavy rainfall in China through the spring will likely bode well for the country’s wheat crop as it begins to emerge from dormancy. The increased precipitation and warmth forecasts support a higher palm oil outlook in Indonesia, which threatens to send the vegetable oil complex lower.

Financials: Global stocks bounced back from yesterday’s selloff due to the rapid international spread of coronavirus. Dow futures traded 0.15% higher this morning to 28,007 points after erasing all of its 2020 gains yesterday. Investors continue to flock to safe-haven assets as the 10-year Treasury bond yield flirted with record lows yesterday and again this morning, trading at 1.370%. The previous record low was set in July 2016 at 1.364%. Energy futures were unsteady this morning as fears over the global spread of coronavirus weighed March light crude oil futures down $0.13 to $51.45/barrel.

Farm Futures was honored to have Dr. Barry Flinchbaugh of Kansas State University and Dr. Dave Kohl of Virginia Tech University speak at this year’s Farm Futures Business Summit in January. The professors regaled the audience with their expertise on farm policy and financial management, sharing many impactful stories from their decades of experience as ag economists. Drs. Flinchbaugh and Kohl sat down with Farm Futures’ Mike Wilson to share some of the secrets of their success and how they have paid it forward over the years.

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