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Morning Market Review for Feb. 27, 2020

Grain prices tilt lower again. (Comments are updated by 7:30 a.m. Central Time.)

Overnight trends:

Corn: Down 2

Soybeans:  Down 3 to 4

Wheat: Down 2 to 4

*Prices as of 6:50am CST.

Corn, soybeans and wheat all in search of bullish news to pull out of the “coronavirus spiral”

News that a coronavirus case of “unknown origin” has made it to the U.S., coupled with some worries that the Trump Administration is currently unprepared to deal with a large spread domestic outbreak, sent financial and energy markets significantly lower overnight. And grain prices are once again pointed lower heading into Thursday’s session, with corn, soybeans and wheat all notching overnight losses of around 0.5% as spillover weakness from outside markets triggered some technical selling.

The latest 72-hour precipitation map from NOAA shows mostly dry conditions in the central U.S. through the weekend, although parts of the eastern Corn Belt could gather some very light accumulations by Sunday. Official 6 to 10 and 8 to 14-day forecasts out yesterday and the latest updates from the ensemble models show early March could see some warmer-than-normal temperatures east of the Mississippi, with colder weather more likely to prevail farther west. Seasonally wet weather is also probable next week.

Overnight, Asian markets were mixed, as China edged slightly higher and Japan tumbled 2% lower. European markets in midday trading were also all tilted around 2% lower. In the U.S., Dow futures tumbled more than 350 points lower overnight after the CDC confirmed the first U.S. case of “unknown origin” for the coronavirus, meaning the agency doesn’t know how the patient contacted the virus. Through Wednesday, the Dow has already lost more than 2,000 points this week, sending it on pace for its worst week since 2008.

Worries about what a global pandemic could do to the global economy have also weighed heavily on energy prices, with crude oil down another 2% overnight to fall below $48 per barrel. Gasoline and diesel were also down 2.5% to 3% last night. The U.S. Dollar firmed moderately.

Corn prices were down around 0.5% last night, with May futures dropping 2.5 cents to $3.72 ahead of Thursday’s open. A bearish shadow has been thrown over a broad range of commodities this week as coronavirus cases have spread to several other countries, including the South Korea, Italy and the U.S. A healthy round of export sales data from USDA later this morning could help break the spell, but traders have sometimes shrugged off such data in the past if other matters have captured their focus.

Analysts expect USDA to show corn sales ranging between 31.5 million and 51.2 million bushels for the week ending February 20. Actuals will need to land on the high end of those estimates to top the prior week’s tally of 49.2 million bushels.

Ethanol production for the week ending February 21 made some momentum, reaching a daily average of 1.054 million barrels, per data from the U.S. Energy Administration Information yesterday. April ethanol futures have followed other energy futures lower overnight, losing another 1.5% to $1.28.

Corn basis bids were largely steady across the central U.S. but did dip a penny lower at an Iowa river terminal yesterday. Lower futures prices have disincentivized farmer sales this week for the most part.

The preliminary report from the CBOT showed daily futures volume making it to 353534, with open interest falling 7,408. Options volume of 37,640 is very closely split between calls (19,091) and puts (18,549). With near-the-money May contracts not expiring for nearly two months, implied volatility remains relatively low, at 15.74%.

Overseas markets are also slight down today. March futures in China held mostly steady at $6.82, and March Paris futures took a small dip to $4.71 in midday trading after adjustments for volumes and currencies.

Soybean prices face the same outside bearish factors as corn, suffering a similar setback of around 0.5% on spillover weakness from financial and energy markets. Worries prevail that China’s coronavirus outbreak will be severe enough to curb its appetite for U.S. agricultural purchases in the short term. Traders will be watching this morning’s export sales report from USDA for any significant signs of activity.

In total, analysts are not expecting USDA to report an impressive amount of soybean sales last week, with guesses ranging between 22.0 million and 33.1 million bushels for the week ending February 20. Still, they’re expressing confidence that the total will still top the prior week’s tepid tally of 18.3 million bushels. Analysts also expect USDA to report another 150,000 to 350,000 metric tons of soymeal sales, plus 8,000 to 45,000 MT of soyoil sales last week.

Soybean basis bids ticked a penny higher yesterday at an Illinois river terminal while holding steady elsewhere across the central U.S.

A law firm estimates that as many as 2,000 farmers could seek retribution for crop damages from dicamba after a jury awarded a Missouri farm $250 million in punitive damages earlier this month. Three years ago, 3.6 million acres of soybeans on 2,708 farms nationwide were damaged by dicamba, according to the estimate of University of Missouri crop science professor Kevin Bradley. Click here for more updates from Farm Futures policy editor Jacqui Fatka.

The preliminary report from the CBOT showed daily futures volume just at 215,931 with open interest also down 7,478. Options volume is at 28,033, closely favoring calls (14,800) versus puts (13,233). Implied volatility in near-the-money May contracts don’t expire until late April, hovering just above 12% for now.

Vegetable oil markets in Asia have trended lower in recent sessions. May soybean oil futures in China have been on its heels lately, down to 36.36 cents today, with March palm oil futures in Malaysia also falling moderately this past week to land at 26.90 cents today.

Oilseed markets internationally are mixed from a day ago, meantime. March soybean futures in China are trying to hold at $13.84. May rapeseed futures in Paris afternoon trade trended 2.5 cents lower, sliding to $9.71, while May Winnipeg canola overnight trended nearly 4 cents higher to $7.66 after adjustments for currencies and volumes.

Wheat prices continue to show moderate sensitivity to spillover weakness in financial and energy markets, along with a strengthening dollar. Some other bullish news probably needs to enter the fray to shake prices out of their current doldrums.

Could USDA’s export sales report out later this morning be a market mover? Analysts do expect a week-over-week improvement, with average trade guesses ranging between 15.6 million and 25.7 million for the week ending February 20. Even the low end of those estimates is better than the prior week’s tally of 14.9 million bushels.

Overseas, some countries received offers for the international grain tenders they’ve recently issued. That includes Bangladesh’s tender to purchase 1.8 million bushels of wheat and Tunisia’s tender to purchase 3.4 million bushels of animal feed barley. Jordan also issued a new international tender for 4.4 million bushels of milling wheat from optional origins, with a deadline of March 3.

The preliminary report from CBOT showed daily SRW volume at 162,476 with open interest tumbling 16,292 lower. Options volume reached 35,426, now narrowly favoring puts (18,692) over calls (16,734). Implied volatility in May near-the-money options remain higher compared to other grains, coming in at 23.25%.

Volume in HRW wheat made it to 74,079, while open interest dropped 5,486. Options volume remains relatively slim at 5,176, moderately favoring calls (3,232) over puts (1,944).

In overseas markets, May futures for Eastern Australian Wheat are holding at $6.53, and May wheat futures in Paris afternoon trade are tracking fractionally lower at $5.62 after adjustments for currencies and volumes.

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